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Saudi mortgage law in final stages
Saudi Arabia's advisory Shura Council is examining draft proposals for a long-awaited mortgage law and mortgage financing regulations that will allow more Saudis to own property, the finance ministry said on Wednesday.
"The issuing of mortgage financing regulations, which have been drafted by committee... and are currently being reviewed by the Shura Council ... will help establish the whole regulatory framework for the financing of this sector," it said in a statement to journalists.
The long-anticipated mortgage law is expected to allow much wider access to property ownership, in a country where only one out of five Saudis owns a home.
The state-owned Public Investment Fund, the General Organization for Social Investment, the Public Pension Agency and the World Bank's International Finance Corporation (IFC) signed a memorandum of understanding on Wednesday for a $400-million housing finance facility.
Under the agreement, the four institutions would provide long-term funding to banks and housing finance firms to help them provide affordable financing to lower- and middle-income households, Finance Minister Ibrahim Al-Assaf told reporters.
But key to this programme will be the issue of the mortgage law, realtors say.
"Everybody awaits this law", Al-Assaf said. "The most difficult part of the task has already been done ... Our colleagues in the Shura Council and the Council of Ministers are very eager to finalise it".
He declined to set a timeframe for its launch.
The government has allocated 25 billion riyals ($6.67 billion) for the Saudi Real Estate Development Fund for 2008 alone and an additional 10 billion riyals will be spent on housing for low-income families the same year, Al-Assaf added.
A surge in rent and real estate prices over the past 12 months has added more pressure on the government to deal with a growing housing deficit, especially for low-income households.
The kingdom has witnessed a boom in construction and infrastructure projects but realtors say the deficit in housing especially for low-income households has not been reduced.
Only 22% of Saudis own their houses, Abdullatif Al-Shelash, managing director of Saudi Home Loans Co. (SHL), told Arabian Business in December.
The kingdom will need some 4.5 million new housing units within the next five years to accommodate its growing population, he said.
SHL will provide loans compliant with Islamic law. Its shareholders are Arab National Bank, private housing finance firm Kingdom Installment, private property developer Dar Al-Arkan and the IFC. (Reuters)
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