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.”


Bitcoin craze hits Iran as US sanctions squeeze weak economy

Updated 18 July 2019
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Bitcoin craze hits Iran as US sanctions squeeze weak economy

  • Some Iranian officials worry that “mining” is abusing the subsidized electricity
  • Iranian Bitcoin miners are purchasing more affordable Chinese ready-made computers

TEHRAN: Iranians feeling the squeeze from US sanctions targeting the Islamic Republic’s ailing economy are increasingly turning to such digital currencies as Bitcoin to make money, prompting alarm in and out of the country.
In Iran, some government officials worry that the energy-hungry process of “mining” Bitcoin is abusing Iran’s system of subsidized electricity; in the United States, some observers have warned that cryptocurrencies could be used to bypass the Trump administration’s sanctions targeting Iran over its unraveling nuclear deal with world powers.
The Bitcoin craze has made the front pages of Iranian newspapers and been discussed by some of the country’s top ayatollahs, and there have been televised police raids on hidden computer farms set up to bring in money by “mining” the currency.
Like other digital currencies, Bitcoin is an alternative to money printed by sovereign governments around the world. Unlike those bills, however, cryptocurrencies are not controlled by a central bank. Bitcoin and other digital currencies like it trade globally in highly speculative markets without any backing from a physical entity.
As a result, computers around the world “mine” the data, meaning they use highly complex algorithms to verify transactions. The verified transactions, called blocks, are then added to a public record, known as the blockchain. Any time “miners” add a new block to the blockchain, they are rewarded with a payment in bitcoins.
To work, the expensive specialized computers require a lot of electricity to power their processors and to keep them cool. In Iran, “miners” have an edge because electricity is cheap thanks to longtime government subsidies. “Miners” also buy cheaper Chinese ready-made computers to do the work.
But the constant raids and authorities’ conflicting statements on the issue have Bitcoin “miners” in Iran incredibly leery of being identified. Those contacted by The Associated Press refused to speak about their work or to say how much they earn from their “mining.”
But they acknowledge they do this to make some money at a time when Iran’s currency, the rial, tumbled from 32,000 rials to $1 at the time of the 2015 nuclear deal, to around 120,000 rials to $1 now.
“It is clear that here has turned into a heaven for ‘miners,’” Mohammad Javad Azari Jahromi, Iran’s minister for information and communications technology, recently told AP in an interview. “The business of ‘mining’ is not forbidden in law but the government and the Central Bank have ordered the Customs Bureau to ban the import of (mining machines) until new regulations are introduced.”
Ali Bakhshi, the head of the Iran Electrical Industry Syndicate, said earlier this month that the country’s Energy Ministry likely would boost costs for Bitcoin “miners” to 7 cents for each kilowatt of electricity they consume, a massive increase from the current half-cent but still almost half the cost of electricity in the United States, according to the semi-official Fars news agency.
Still, there are concerns, especially among Iran’s religious leaders, that people might try to circumvent paying extra for the electricity as well as using digital currency to hide or move money illicitly.
Tabnak, a hard-line news website associated with a former commander of the country’s paramilitary Revolutionary Guard, quoted three ayatollahs describing Bitcoin as either problematic or “haram,” meaning forbidden. Islam prescribes strict rules about finance.
But Jahromi said clerics became more receptive to the idea after his staff briefed them that Bitcoin had a value in the real world, which is required under Islamic finance. Islamic finance also prohibits gambling, the payment of interest and misleading others.
“Some of our top clerics have issued fatwas that say Bitcoin is money without a reserve, that it is rejected by Islamic and cybercurrencies are haram,” Jahromi said. “When we explain to them this is not a currency but an asset, they change their mind.”
Iran has tried to keep its economic situation in check by controlling foreign currency rates and cutting down on those moving their money from the rial to other currencies, including Bitcoin. Last year, the semi-official Mehr news agency quoted Mohammad Reza Pour-Ebrahimi, the head of the Iranian parliament’s economic commission, as suggesting that about $2.5 billion left Iran through digital currency purchases. He did not elaborate and authorities have not discussed it since.
The US, meanwhile, has been keeping a close watch on Iranians holding bitcoins. In November, a federal grand jury in Newark, New Jersey, accused two Iranian men of hacking and holding hostage computer systems of over 200 American entities to extort them for Bitcoin, including the cities of Newark and Atlanta.
“As Iran becomes increasingly isolated and desperate for access to US dollars, it is vital that virtual currency exchanges, peer-to-peer exchangers and other providers of digital currency services harden their networks against these illicit schemes,” said Sigal Mandelker, Treasury’s undersecretary for terrorism and financial intelligence.
Not so, said Jahromi.
“Cybercurrencies are effective in bypassing sanctions when it comes to small transactions, but we do not see any special impact in them as far as mega-transactions are concerned,” he said. “We cannot use them to go around international monetary mechanisms.”