Kuwait Real Estate News
Call for change in property assessment standards
Real estate assessment in Kuwait should be based on real standards developed on the basis of scientific and realistic ground, and the prices should not be manipulated depending on activities of private companies facing technical problems with their budgets, warned real estate and economy experts in Kuwait.
The demands were published in a report conducted by Kuwait News Agency (KUNA) about the impact of mortgage in the budget of the Companies, that are now ready to submit their financial results for 2009, considering the global financial crunch that affected the activities of the companies worldwide.
According to Ali Al-Mousa, the Chairman of Board of Directors of the Securities Group Company, investment firms and banks are subject to control of Central Bank of Kuwait, and therefore need to remain more committed to international accounting standards and other criteria, and be more specific in order to reach a value that is closer to reality, reflecting value of real estate owned by the company within its budget.
When owning a property, the asset has a direct impact on the evaluation process, as there are specific standards to calculate the value of asset owned for investment, which differs from the standards originally owned for trading or for direct use by the company, Al-Mousa pointed out.
Meanwhile, the President of Real Estate Union and Chairman of Commercial Markets Complex Company, Tawfeeq Al-Jarrah said that the assessment of real estate in Kuwait does not depend on scientific basis and is based on the latest sale taking place in the region. But, this is not acceptable as the last sale may have been carried out under special circumstances and therefore it may not be a reliable measure.
Al-Jarrah emphasized on the need to introduce a fair style of evaluation, which takes into account several factors, the most vital being cash flow, location and the future of the region, amongst other factors affecting the value of the property.
Based on assessment of the property and its entry into the budget, Al-Jarrah said that it depends on accounting policy of the company, the company’s policy which is the cost policy or policy of annual evaluation and the value of real estate.
The valuation of real estate is usually done to prepare a budget, or to access credit facilities from a bank, or during times of liquidation of the company among its heirs or partners among each other, or for knowing the worth of real estate asset, in which case exchange or evaluation of corporate assets for merger between two property companies is possible, or to sell a real estate property in the auction.
The Director of Al Enma’a Real Estate Company, Walid Al-Jeri said that in Kuwait, real estate appraisal is sometimes used to improve budgets on the basis that it is easy to assess the property of highest value, as a property criteria for such a evaluation is absent in Kuwait. Al-Jeri emphasized that this assessment is dependent on the market and not based on a scientific criteria.
However, pointing out that there is no fixed, clear or fair value to determine the value of a property and therefore, the matter is subject to the market.
Al-Ghanim, a banking expert has called for a formula for calculating the average value of property in Kuwait through the regulatory authorities responsible for companies and banks, as the local market is different from the rest of the region, where the proportion of private property is less than 4 percent of the total area of the country.
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