News & Events

05/07/2009 - We were frustrated by the experiences and pressures we faced, which made us change our believes and strategies

Annahar News Paper

Al Othman: The Municipality Played with Tijara’s Dreams in February 25th and 26th Project

Tareq Al Othman: I will not leave Tijara’s right to the Municipality (Photo by Mohammad Amine)

Vice Chairman and Managing Director of Tijara and Real Estate Investment Company, “Tijara”, Tareq Al Othman, confirmed that the Municipality killed the Company’s dreams and aspirations, throughout four years, to obtain a legitimate right to increase the construction rate of February 25th and 26th Towers. The Company also claimed the right to be treated equally with other neighboring land-owner companies which obtained an increase rate. However, we were eliminated although we applied within the set deadlines back then. Al Othman mentioned that the Company’s right was confirmed by four Ministers who were successively in charge of the Municipality, but these promises went with the wind. He also revealed to Annahar: “we are puzzled and confused and still, after four years, in search of our right between the Municipality and the Municipal Council, which caused us a major loss of investment opportunities in this land, whether by sale or investment; especially that we truly believe in our rightfulness witnessed by many municipal officials and high-ranking officers.” Al Othman clarified: “We were frustrated by bureaucracy and failure to obtain our right which made us changes a lot of our believes and strategies. Experiences and pressures we faced within the few past years made us think of investment outside Kuwait despite our faith that Kuwait is and will always be one of the best investment environment if venial faults are surpassed and priorities are considered, the fact that entered the country through a maze and dark tunnel.” Al Othman said that the real estate sector still suffers from restrains hindering its progress, on top of which are Laws no. 8 and 9 of 2008. “We are not skeptical about the legislator’s intention to decrease plot prices and prevent speculation, but they would have found easier solutions”, Al Othman said. He refused to comment on the Capital appearance “after it became disgraceful and inappropriate to Kuwait”, as well as the private sector’s role in development and investment, regionally and within the Arab World. He also rejected all the allegations thrown at the private sector accusing it to be exploiter and gain seeker aiming to slaughter the citizen; however, this goes without generalization. Al Othman called to pay attention to the infrastructure requiring development, especially that Kuwait has all the potentials and needs an initiative only. He presented his own workshop to remedy Kuwait’s real estate problems by: developing the laws of the Public Authority for Housing Welfare to engage the private sector in the Public Authority’s projects by suggesting more lands and prices; imposing very high taxes or charges on real estate developers in case they don’t complete housing land development within the set deadline: if a developer sell a land without completing the development thereof, within the set period, a considerable profit or income tax will be imposed thereon which will make speculation unprofitable; and exploiting open spaces spread over the capital, and using some of such lands as parking spaces according to State’s requirements. Al Othman said that Kuwait has all the potentials to be in the lead and needs to activate the decisions in order to decisively confront any trouble. “We didn’t properly take advantage of our country’s potentials especially that some neighboring countries, with less potentials, have set plans, made efforts, succeeded and became better than us”, he added. The following is Tareq Al Othman’s interview with Annahar:

The previously announced February 25th and 26th Towers Project entered the Municipality’s dark tunnel and didn’t get through, why?

We were deeply and bitterly frustrated by this project. We were one of the first companies that applied for construction rate increase as per the Municipal Council resolution appertaining to the transformation of the 19 plots located in Al Sharq area (near Al Raya) into administrative offices. We applied for this increase within the legal approved period in June 2005, i.e. six months before the closing date on 31.12.2005, during Minister Baker’s term.

And where are you now?

In June 2005, we submitted this application to the Municipality with all the required documents to obtain this rate. Ever since that date, we have followed up this issue with the Municipality, semi-daily and with many reminder letters, to settle this question and give us an approval in order to complete the other required procedures. Unfortunately, we didn’t receive any reply despite our continuous follow-up and many letters as well as the Municipality’s promises that our issue is solved pending Committees’ meetings. Regrettably, nothing has been made, the legal deadline elapsed and we didn’t receive any official notice from the Municipality.

Four Ministers

Why?

We don’t know. Every time we talk to an official, he tells us that the issue is considered by the Committees, and as long as the Company has submitted its application within the official deadline, you will have a right and you will get it. Four Ministers have passed (Ahmad Baker, Abdullah Al Mohailabi, Moussa Al Sarraf, and Fadel Safar) but in vain and the issues are still unsettled. The paradox is that the Municipality has issued a letter dated 7/12/2005, by the Head of the Committee of Investment and Commercial Area Development, to the Director of the Municipality, recommending providing the real estates he approved to transform into administrative offices, as included in the Municipal Council’s resolution, including our real estates, with the additional increase rate of 400%, just like other real estates that have been given an additional rate; knowing that the remaining real estates, which didn’t get an additional rate, don’t represent more than 40% of these estates. We asked for an explanation thereof but, unfortunately, no reply has been received and issues remained as they were.

Then?

A year later, on 27.12.2006, the Committee of Investment and Commercial Area Development gave another notice to the Director of the Municipality, clarifying that the Committee has recommended, in its previous letter, providing the remaining real estates, representing 40%, with the right to obtain the same rate as the other towers, especially those who applied within the legal deadline. The Committee also clarified that a previous letter has been sent in this respect without any reply thereto, and that the same recommendation was previously given to necessarily provide the remaining real estates with the construction increase rate.

Never Ending Promises

What happened after this second letter?

Absolutely nothing. We don’t know how things are managed inside the Municipality, because we didn’t get any reply.

What have you done to protect the corporate and shareholders’ rights?

During this period, we tried with the Municipality which gave us promises. Every time a Minister was appointed, they told us to wait for a while and hopefully everything will be settled, by confirming our right. Unfortunately, we deal in the Municipality with individuals not with a clear system. Thus, every Minister comes with his own vision and way of work; therefore, we must wait until he studies the issue. Consequently, we submitted letters and correspondences to each Minister, until the appointment of Minister Moussa Al Sarraf who cooperated with us and referred the issue, in late 2007, to the Municipal Council, among the members of which was the current Minister, Dr. Fadel, who was also a member in the Capital Committee. In order to facilitate the issue for the members of the Municipal Council, we prepared a special presentation of the project, during which many discussions took place. The members found that the Municipal Council is not competent to consider the issue; otherwise, the Municipality must resolve it because it’s legal. However, we tried to continue in the way the Municipality drew by resolving the issue in the Municipal Council.

Promises Given By Officials

Why the issue wasn’t settled back then?

Regrettably, during that period of time, the Country was facing the dissolution of the National Assembly in 2008. Back then, all the issues were suspended, Al Sarraf left the Ministry, and Dr. Fadel, the current Minister, was appointed, who we hopefully welcomed for being one of the supporters of our cause. On 18.06.2008, a meeting was held with the current Minister to whom we explained the steps we reached in respect of the matter in question. We were very optimist that the issue will be settled based on his previous support. Thus, we submitted a letter in this respect, which he marked as urgent to the Engineering System Administration that had already submitted a letter to the Director of the Municipality requiring approval of the increase rate, just like the one given to the others. Minister Safar had a positive reaction to our issue and called for a meeting with the municipal officials for settlement.

What were the results of the meeting?

The Minister asked the municipal officials about Tijara’s project, they replied that the Company was unjustly treated by not being given its right of the determined increase, knowing that the Company applied within the legal deadline. During the meeting, the Ministry urged them to give us justice as soon as possible.

How the Company reacted?

We submitted another letter dated 27.07.2008 to thank the Minister for the attention given to our issue and his prompt attempts to give us justice. We clarified to him that since the date of our first letter, we were bewildered between municipal departments and offices without getting any resolution to obtain our right for increase rate. We mentioned in our letter the recommendation of the Committee of Investment Area Development, so we can be treated equally with others. On this basis, in November 2008, the Minister referred the issue, once again, to the Municipal Council which agreed, on 05.01.2009, to provide us with the increase rate given to other neighboring companies. Thus, we became entitled of an 800% construction rate.

Here and There

What happened after the Municipal Council approved the rate?

Unfortunately, on 28.01.2009, the Municipality rejected, surprisingly, the Municipal Council’s resolution; the reason is unknown to us, although one of the municipal officials had previously conducted and presented a study in a workshop organized by the Municipality itself, to which many real estate companies were invited, in order to claim construction rates and justice for towers and real estate owners. We don’t know the reason behind these contradictions!!

The main question is: if the Municipality was willing to refuse the increase, why the issue was referred to the Municipal Council?!

We don’t know. They left us confounded here and there. By referring our request to the Municipal Council, the Municipality paralyzed our business for approximately a year and half, during which we would have used, leased, sold or invested the land in a beneficial way. However, it is a surprising and strange attitude from the part of the Municipality to settle the issue in this way, in view of the current decrease of land prices.

We Won’t Renounce Our Right

Are you willing to take any legal action?

We will keep on following the issue in order to protect our shareholders’ right in any way that will preserve our rights. We are legally entitled of this right and, God willing, we won’t let it go.

Did such procrastinations and bureaucracy, by some State authorities, impact your strategic plans?

Unfortunately, we were frustrated by the stressful struggle we faced to obtain our right, and this made us change many of our strategies and believes. We used to be one of the first people adhering to work inside Kuwait, and one of the last people who left the country to invest abroad, due to our persistence in working and investing in our country, hopefully in the worst conditions. Moreover, we participate in Kuwait development and growth, and this is our duty in which we believe. However, I regret to say that the experiences we faced during the few past years, and the pressures that led us to frustration, made us look for other locations for investment.

Good Intentions

Real estate market has been facing a lot of pressure since last year, how long this pressure will last?

We don’t deny the good and excellent intentions of the legislator of Laws 8 and 9 to maintain the prices of private housing plots, for being a vital and sensitive subject aiming at preventing speculation. However, from my point of view, this might have been legislated in a better way because the private sector is usually the developer, worldwide. Thus, it might have been possible to find easy, appropriate and less problematic solutions.

Development of Laws

What are the solutions?

First: Development of the laws appertaining to the Public Authority for Housing Welfare, in order to engage the private sector in the Authority’s projects through participation.

Second: Offering more lands and prices which will lead to price decrease due to the increasing offers. It is mainly about supply and demand.

Third: Imposition of new very high taxes or fees on real estate developers if they don’t develop residential lands within the set period: if a developer sell a land without completing the development thereof, within the set period, a considerable profit or income tax will be imposed thereon which will make profitability invaluable and the development will be the only solution.

Such regulations are not new but applied in all countries worldwide. This will make speculation unprofitable, thus, development will be essential to provide residences of different and various locations, spaces, sizes and prices to choose from freely by the consumer. When companies build projects, they will offer better and lower prices because they construct big numbers of residences, we have many examples on this. Note that we have submitted these proposals in a worksheet more than three years ago, to limit speculation in private housing.

Private Sector Is Not An Exploiter

The private sector is accused of being an exploiter seeking to slaughter the citizen, what’s your opinion?

We should not judge an entire nation based upon others’ offences. In all world countries there’s a small group seeking domination and monopoly, and we should not negatively judge the market by such group because monopolization may be controlled by: forbidding any individual to own unlimited spaces of housing lands, imposing taxes on people who own residential plots without development, and finally, charge speculators on residential plots by imposing taxes on relevant profits. This way we will stop monopolization and speculation.

Capital Appearance is Sad
What do you think of the Capital appearance?

No comment, unfortunately…. Capital appearance is very sad. Kuwait’s Capital must not look this way.

Do you think that the Country’s infrastructure fits the boom of towers currently under construction?

Infrastructure needs development but this isn’t difficult or impossible because potentials exist. We only need to make some decisions and initiatives, and dispose of futile bureaucracy. For instance, don’t you think that it is possible to exploit and develop open spaces spread over the Capital in a way that serves the Country? If some of these spaces are used as parking spaces according to State requirements, these spaces, instead of being open, would resolve many issues, eliminate the problem of parking spaces in the Capital and provide it with a better appearance. This solution will be useful for the State which will benefit from the development of such open spaces, as well citizens and the private sector by solving parking spaces problem. However, it is wrong to consider the private sector as an exploiter.

Consider Priorities There are some concerns that the current National Assembly will continue to complicate and disrupt economic laws, what do you think? We hope that there won’t be any complication and we surpass this stage. We can discuss our conflicts in a better way, and it’s necessary to renounce small insignificant issues and pay attention to bigger and more important matters. We suffered enough from the previous period which had impacts on development, in general, whether as to health, education, housing or even sports. Therefore, we must surpass the previous period and consider priorities because holding on to insignificant matters will enter us into mazes and dark tunnels.

Do you think that Kuwait is a good investment environment for the future?

Yes, because Kuwait has started investment since more than 40 years, and was the best. We have a good future environment due to well-known mentalities and experiences; Kuwaiti investments existing everywhere are good examples. In addition to the current boom, we are an institutional and rich country, we only need to activate decisions and decisively face any defect. We didn’t exploit Kuwait’s potentials, whereas other countries, with less capability and without the required environment, infrastructure or even legislations, have set plans, made efforts, succeeded and became better than us.

Are you considering entering new markets?

We focus on regional markets. We have indeed entered the Saudi market which is an attractive and important market due to its reliability on domestic demand and that is a very good characteristic. However, this doesn’t mean that we will not consider other opportunities, if any.

Great Hope To Achieve The Amiri Wish

Al Othman confirmed that he is unfortunately really frustrated because in the past “we used to be proud of being one of the rare companies which refused to leave Kuwait. However, regrettably, we were obliged later to go abroad for being a shareholding company, with shareholders; thus, we must search for appropriate profits and business environment. Although we used to seek advanced projects with new economic and developmental notion, including high quality and luxurious construction of advanced ideas, we achieved some of these ideas and worked on developing the real estate market, we faced many difficulties and problems that made us think of heading abroad in search of investment in other countries.

Despite all these frustrations, I still have hope that, at the end, what should be shall be, due to His Highness’ insistence on promoting Kuwait as a financial and commercial center. This wish will be achieved, God willing, but the National Assembly must cooperate with Government to realize it in the future.”

There isn’t any State in the world that doesn’t approve real estate mortgage.

Al Othman showed resentment toward mortgage stop, saying: “There isn’t any State in the world that doesn’t approve real estate mortgage. Even Saudi Arabia has finally approved real estate mortgage because it provides a house for every citizen.”