Saudi Arabia plans to spend 120 billion riyals ($32 billion) on subsidized home loans for borrowers, as it seeks to create conditions for an expanded private-sector role in a mortgage market dominated by the government.
The kingdom’s new housing program, announced on Monday, also includes an 18 billion riyal loan-guarantee program to boost access to funding, and 12.5 billion riyals to support home down-payments, all to be spent through 2030, Housing Minister Majed Alhogail said in an interview.
Authorities want to expand the mortgage market by more than 70 percent to reach 502 billion riyals by 2020, largely through increased private-sector participation, he said. Currently, the government provides 65 percent of home loans.
“We want to change that completely,” Alhogail said. “It’s a very generous program. It’s enabling the private sector, reducing their risk to a certain level.”
The new funding is part of a push to lift home ownership among Saudi citizens from 50 percent to 60 percent by 2020. Housing policy is an especially sensitive plank of Crown Prince Mohammed bin Salman’s economic transformation plan, dubbed “ Vision 2030,” as many Saudis say they’re unable to afford homes or obtain financing.
The crown prince, the kingdom’s 32-year-old predominant leader, is seeking to reduce the population’s reliance on state spending without triggering a public backlash.
The government will monitor conditions and adjust policies “to ensure there is no bubble” in the housing market, Alhogail said. “As you know, when you launch a very strong program like this, you expect the price could increase,” he said. “You could expect more defaults, because you are lending to people who don’t have steady income.”
The kingdom wants to build 125,000 housing units in 2018, compared to 110,000 last year, Alhogail said. Most new units cost between 250,000 riyals to 750,000 riyals, he said.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.