New mortgages to boost home ownership in Saudi Arabia

A new mortgage initiative is expected to give home ownership a boost in Saudi Arabia. (Shutterstock)
Updated 09 August 2018
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New mortgages to boost home ownership in Saudi Arabia

  • Buyers can tap long-term fixed borrowing
  • Offers protection against rising interest rates

DUBAI: Saudi citizens will be able to apply for cheaper and more accessible mortgages at fixed rates under an initiative launched Wednesday by the Saudi Real Estate Refinance Company (SRC), the body set up and backed by the Kingdom’s Public Investment Fund.
The SRC initiative will allow new or existing borrowers to access facilities to boost their mortgage potential, with at least seven big Saudi Arabian financial institutions taking part to provide new mortgages for home buyers.
Unveiling the scheme in Riyadh, Majed Bin Abdullah Al-Hogail, minister of housing and chairman of SRC, said that the launch of the new funding solution marks the official start of SRC’s strategic plan to help ‘unlock’ the Saudi housing finance market, by broadening and adapting the product offering and by increasing liquidity, thus enabling lenders to offer more accessible home buying options to citizens.
“The importance of this step is stressed when we realize that very few homes are owned through mortgage in Saudi Arabia. This step by SRC, as part of enabling the mortgage finance sector, will allow financial institutions to provide financing solutions of 15 to 20-year fixed rate mortgages to start with,” he added.
SRC has signed deals with Deutsche Gulf Finance, Bidaya Home Finance, Amlak International, Saudi Home Loans, National Commercial Bank, Dar Al Tamleek, and SABB to act as “customer touchpoints” for the new scheme, and other financial institutions are expected to join the network in due course.
The new mortgage facilities will be shariah-compliant, and will help reduce the risk to borrowers exposure to rising global interest rates. US rates are forecast to rise over the next year, with implications for borrowing in dollar-pegged currencies like the Saudi riyal.
“SRC will make a large amount of funding available to the financial institutions we partner with to provide more options of financing. We worked closely with the Ministry of Housing, Ministry of Finance and the Saudi Arabian Monetary Agency who planned this step and worked hard with us to make it happen,” Fabrice Susini, chef executive of SRC told Arab News.
He declined to say how much funding SRC would make available, explaining that it depended on the demand in the market
“Our objective is to enable these firms to improve the availability of mortgage financing for Saudis, while at the same time introducing long-term fixed rate mortgages into the market as a standard and widely available product for the first time,” Susini said.
Fixed rate long term mortgages have been available in the Kingdom for some time, since the first laws allowing mortgages were passed in 2012. But they are not as widely taken up as in other parts of the world.
“Our role is to make it possible for the ‘average’ Saudi to obtain financing so they can own a home and build equity. We know that many aspiring homeowners look for certainty with their mortgage payments over the longer term.
“The new long-term fixed-rate mortgages meet this need by providing a high degree of predictability and protection from potential interest rate increases. This will give customers the good feeling of having ‘future-proofed’ their mortgage payments, which gives them peace of mind when it comes to their monthly expenses,” Susini said.
Al-Hogail said: “This plan will have a high impact on our goal to increase homeownership to 60 percent by 2020 and 70 percent by 2030, as per the Housing Vision Realization Program.”
Earlier this year the government announced a SR120 billion housing program with the aim of increasing national levels of home ownership.
Real estate industry experts welcomed the move.
David O’Hara, head of property consultants Cluttons’ Saudi Arabia office, said: “Any change to make mortgages more accessible is a good thing for business in general. There is a the ripple effect from home ownership across the economy. Currently entry prices are high and are preventing people from setting up home where they would like to live.”


MODON to establish integrated pharmaceutical complex

Updated 23 May 2019
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MODON to establish integrated pharmaceutical complex

JEDDAH: The Saudi Authority for Industrial Cities and Technology Zones (MODON) has signed an industrial land lease covering more than 62 thousand square meters in the city of Madinah, to build a pharmaceutical complex including research and development centers, with a total investment reaching SR 570 million.

MODON’s Director General Khalid bin Mohammed Al-Salem said that the signing of the contract was the result of joint work with the National Program for the Development of Industrial Compounds. MODON provided various facilities and incentives to support the investment, with the project set to provide nearly 1000 jobs for both genders with a localization rate exceeding 50 percent.

He added that the project is in line with the goals of the National Industrial and Logistics Development Program (NIDLP) to localize the most advanced industries in the world, in accordance with Saudi Vision 2030 for economic diversification.

Since its inception in 2001, MODON has been developing integrated industrial lands in accordance with the highest international standards. It currently oversees 35 industrial cities under development in various regions of the Kingdom, in addition to supervising private industrial parks and cities. The developed industrial lands exceeded until today 198.8 million square meters, while the existing industrial cities include 3,474 productive factories.