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

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.”


Apple embarks on EU court battle over 13-bn-euro tax bill

Updated 7 min 39 sec ago

Apple embarks on EU court battle over 13-bn-euro tax bill

LUXEMBOURG: Apple embarks on an epic court battle with the EU on Tuesday, fighting the commission’s landmark order that the iPhone-maker reimburse Ireland 13 billion euros ($14 billion) in back taxes.
Lawyers for the world’s biggest company will face EU officials in a Luxembourg court, challenging a decision that CEO Tim Cook slammed at the time as “total political crap.”
The European Commission’s conclusion was delivered in August 2016 by Competition Commissioner Margrethe Vestager, a shock decision that put Europe at the forefront of an emerging effort to rein in the power of US big tech.
The two days of hearings on Tuesday and Wednesday will take place at the EU’s lower General Court, where judges will give their judgment no earlier than 2020.
Any appeal would then go the EU’s highest court, the European Court of Justice, for a final decision that could land as late as 2021.
The EU accuses Apple of parking untaxed revenue earned in Europe, Africa, the Middle East and India, in Ireland, which has emerged as a European hub for big tech and global pharma giants.
This privilege allegedly gave Apple an advantage over other companies, allowing it to avoid taxes between 2003 and 2014 of around 13 billion euros which, according to Brussels, constituted illegal “state aid” by Ireland.
Apple fiercely denies the tax bill. The US government also insists the order by Brussels constitutes a major breach of international tax law.
“The European Commission has tried to rewrite Apple’s history in Europe, to ignore Ireland’s tax laws and, in doing so, to disrupt the international tax system,” Tim Cook said in an open letter in 2016.
The group insists that it is in the United States, where the company invests in research and development and thus creates wealth, that it must pay taxes on the revenue in question.
This became possible after a major tax overhaul in the US at the end of 2017 that allowed Apple to repatriate profits made abroad. Apple has promised to pay Washington a tax bill of $37 billion, in addition to the taxes already paid in the United States.
The California-based giant is supported in its fight by Ireland which has also appealed, refusing to be singled out as a tax haven.
“We will present a very strong case,” promised Irish Finance Minister Paschal Donohoe on Friday.
The two days of hearings are taking place in a tense trade context between the EU and the United States where President Donald Trump accuses Europeans of deliberately attacking American technology giants.
The EU’s Competition supremo, Vestager, is in particular accused by the US president of “hating” the US. He has slammed her as the “tax lady” because of the investigations and heavy fines imposed on US groups such as Google.
Pending the conclusion of the case, Apple has blocked the funds in an escrow account: a total of 14.3 billion euros, after interest.
The group, which has been present in Ireland since the 1980s, employs around 6,000 people in Cork, the country’s second-largest city.
The first signs of how the Apple case may finish will come as early as September 24 when the General Court will rule on whether the EU was right to demand unpaid taxes from Starbucks and a unit of Fiat Chrysler.