Real estate boom expected Banks to benefit, say experts Saudi Gazette reportJEDDAH — The long-awaited overhaul of the country's mortgage law received the Cabinet go-ahead Monday. Saudi Arabia is spending about $500 billion to build infrastructure and industry. The mortgage law, approved more than a decade after it was first proposed, stipulates the regulations to establish mortgage companies and their activities, Abdulaziz Khoja, Minister of Culture and Information, said here after a Cabinet meeting presided over by King Abdullah, Custodian of the Two Holy Mosques. The law aims at achieving the necessary guarantees for trade or investment in the real estate sector by establishing strict rules protecting the creditor, debtor and the guarantor in the process. The new law submitted by Dr. Ibrahim Al-Assaf, Finance Minister, includes a detailed statement about the nature of the mortgaged assets and the procedures of mortgage contracts. It also stresses the importance of achieving a well-defined flexibility in order to benefit from real estate and movable assets. The law is part of an overhaul of the Kingdom's home finance market, regulating all parts of the industry: from registering mortgages to allowing judges to prosecute police officers who fail to carry out eviction orders. It is expected to encourage banks to lend as it would ease the concerns of lenders discouraged by previously unclear regulations that could lead to lengthy court disputes in cases of default. Home loans do exist in Saudi Arabia, with payments deducted from salaries when these enter bank accounts. However, the new law allows for the first time the creation of products secured against the property, meaning the borrower can benefit from ownership of the asset, the Cabinet said. Regulation of the mortgage sector will be undertaken by the Kingdom's central bank, the Saudi Arabian Monetary Agency. The mortgage law “should help address one of the critical social issues in the Kingdom — housing," said James Reeve, senior economist at Samba Financial Group. Housing has long been an issue in a fast-growing country of 27 million people, most of whom under the age of 30, with a lack of low- and medium-cost housing compounded by limited finance options to help bridge the gap to home ownership. The law is also expected to be a boon for banks, by creating a new revenue stream. Annual demand has been put at 150,000 and 200,000 units per year, according to real estate service company Jones Lang LaSalle. “Banks are well capitalized, liquid and geared to provide the lending that is required," Reeve said. The Cabinet commended the King's recent order for a major expansion of the Prophet's Mosque in Madinah. The project is designed to be implemented in three phases and when completed it would accommodate 1.6 million more worshippers. On regional issues, the Cabinet called on the international community to take “decisive measures" to end the bloodshed in Syria. “The Kingdom calls on the international community to take decisive measures to stop ... the mass slaughter" of the Syrian people, Khoja said. President Bashar Al-Assad's regime “must immediately end the massacres and fully implement the ... (UN) plan aimed at reaching a political solution in line with the aspirations of the Syrian people," he added.
