Cenbank chief says move will be 'qualitative jump' in home loan financing in kingdom.
Saudi Arabian central bank governor Muhammad al-Jasser said on Sunday the kingdom will issue its first mortgage law in the next few months, boosting the real-estate industry and allowing banks to diversify their balance sheets.
“I’m optimistic that in the next few months, the law will be issued,” al-Jasser said in an interview in Riyadh.
“It will be a qualitative jump in the way we finance housing in the country and in the way we use financial instruments that are linked to the housing market.”
Saudi Arabia’s property market is suffering from a shortage of housing units, shielding the kingdom from corrections in the real-estate markets of other Gulf Arab states such as the United Arab Emirates, Banque Saudi Fransi said in a report January 13.
Real estate prices in Dubai, the second-largest emirate in the UAE, plummeted around 50 percent from their peak, according to Deutsche Bank AG estimates.
The Shariah-compliant legislation which has been discussed for the past two years will consist of five parts, al-Jasser said.
It will define the terms of mortgages, how they are designed, how they are granted, how companies are licensed and how procedures will be enforced. The law is on the way to the council of ministers before going to the Shura Council, the country’s consultative assembly, for final approval, he said.
“We expect demand for new housing will continue, steered by the indigenous population,” John Sfakianakis, Riyadh-based chief economist at Banque Saudi Fransi said in the report.
“In most areas of the kingdom, a shortfall in the number of housing units available persists, which has placed upward pressure on consumer price inflation in the past two years.”
Bank lending in the world’s largest oil exporter slowed following the global credit crisis and the default of two Saudi family conglomerates: Ahmad Hamad Algosaibi & Brothers Co. and Saad Group.
Eighty banks, including BNP Paribas SA and Citigroup Inc, are owed at least $15.7 billion, sparking a flurry of litigation.
“Hopefully, the mortgage law will ensure the production of sufficient sukuk and corporate bonds that will be held by banks in lieu of government bonds,” al-Jasser said, when asked whether the government planned to issue longer maturity bonds.
Islamic bonds, or sukuk, are asset-based securities that pay profit distributions to investors as Shariah law forbids interest payments.
doesnt this article look familiar? :) i've been seeing the same headline for the last year...(at least) but i guess these 'few months' will never come.
It would be better if they use the word Few Century...instead of Months