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Discuss this article (0 Comments)A legislative lifeline for Saudi’s poor
by This email address is being protected from spam bots, you need Javascript enabled to view it on Sunday, 22 February 2009
In this week's printed issue of Arabian Business Jonathan Reckford, CEO of the housing charity Habitat for Humanity, voices his concern that the global economic downturn could spell disaster for millions of low income families across the world.
"A basic, simple and decent place to live is the foundation for a decent life for a family," he says. "I think our biggest concern will be to make sure the support for the poor doesn't dry up in tough times."
With this in mind, it's good to see Saudi Arabia taking steps to mitigate the fallout - and not solely in the form of cash handouts or bricks-and-mortar donations, but though the enacting of invaluable legislation.
Finance minister Ibrahim Al-Assaf told reporters last week that the Kingdom's first mortgage law is expected to be implemented this year, and that its provisions will "protect all players" involved, as well as cover eviction procedures in case of payment defaults.
Al-Assaf's admission that the law has "taken us much longer than we had hoped at the beginning" may be a remarkable display of understatement - the government has been working on the draft law for almost a decade - but the news that ministers are now examining the latest proposal from the Shura Council is cause for celebration.
While local banks will be thrilled by the unlocking of such massive business potential, the law will also allow millions of Saudis to get their foot on the ladder, and begin to address the Kingdom's lousy home ownership ratio, seen by some as emblematic of Saudi's wealth distribution problems.
The heads of nearly 35,000 Saudi families earn less than SR2,000 ($533) a month, the president of the National Society of Human Rights said last week, after signing an agreement with the Saudi Establishment for Education and Training (SEET), aimed at providing education and training to members of needy families.
Right now, the percentage of home ownership in Saudi barely touches 25 percent, making it the lowest among the GCC states.
High construction costs, limited bank financing and rampant land speculation have led to a severe housing deficit estimated at around one million homes, while rents are rising at an uncomfortable rate.
Moreover, the effects of the 2006 stock market crash are still apparent: that share price collapse wiped out the savings of tens of thousands of nationals, forcing them to abandon any hopes they had of owning a home.
In response, the Saudi government has allocated SR10bn ($2.7bn) to build low-cost housing in different parts of the country to meet the needs of the poor, and the enacting of the new law will enable another strata of society - those lower-middle class families with a steady, if limited, income - to put a roof over their heads.
It's about time that the Gulf's largest economy - buttressed by a local banking system that has so far proved largely immune to the effects of the global crisis, and enormous cash surpluses accrued over the era of peak oil - addressed the needs of its middle and lower classes.
More effective over the long term than any nationalisation quotas, the proposed mortgage law (bar any last-minute wrangling at cabinet level) represents a positive step on the path to progress for millions of Saudi citizens.
Andrew White is the editor of Arabian Business English.
RELATED LINK: Charity begins at home
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