According to many people interviewed by Al-Riyadh newspaper, bureaucratic bottlenecks and the apparently tough conditions set by the Real Estate Development Fund virtually dash the hope of taking advantage of the royal decree issued by Custodian of the Two Holy Mosques King Abdullah last month to allocate more funds to increase personal loans.
The citizens have also noted that the royal decree is being misused to increase prices of plots of lands as well as values of residential apartments and villas.
The royal decree has the purpose to support the housing sector through increased allocations totaling SR55 billion to the General Housing Authority and the Real Estate Development Fund. This should enable these bodies to increase the ceiling of personal loans from SR300,000 up to SR500,000. However, the procedures to extend personal loans at the fund are not well suited to the spirit of the royal decree, many citizens said.
The Saudi housing shortage is so acute that nearly 60 percent of citizens live in rented houses. The younger generation represents more than one-third of them. House rent alone devours some 30 to 40 percent of the income of many citizens. Hence, a solution to the housing problem would produce a big impact on achieving welfare for citizens.
Referring to the difficulties to secure housing loans from thef und, a number of citizens noted that there are only three limited options available to them. These include buying a plot of land and build a house gradually in accordance with allocation of loans in installments from the fund, or buying a villa, which may cost at least SR800,000. It is impossible to own housing units this way if there is an increase in the construction costs or hike in prices of plots of land. The third option is to own an apartment with a reasonable rate ranging from SR550,000 to SR700,000.
However, a citizen must wait for a long time to get a loan from the fund after completing several difficult procedures. The amount of the loan would be fixed in accordance with the field assessment report furnished by the engineer from the fund. Most often, this amount would be insufficient to buy the residential unit and thus jeopardize the efforts of many citizens to own a house.
Take for example the case of Othman Al-Abdullah. “The engineer’s assessment report recommended to give SR300,000 to the owner of the housing unit on the ground that the area of the housing unit is covering less than 175 square meters. But the price fixed by the owner was SR555,000,” he said.
Fixing the price of any residential unit should be in accordance with the assessment from the fund and the loans should be extended in installments. However, owners of housing units want to get the total price in a single transaction.
“As an aftermath of the increase in personal loans extended by the fund, there has also been a considerable increase in the value of plots of land and residential apartments, and in the prices of construction materials,” says an employee, Fahd Al-Baqami.
Saud Al-Mutairi, a young man, says that the only solution to such problems is to extend the loan by the fund as per the royal decree in a single transaction. “The procedures for sanctioning the loan should be sound. We need loans only after completing the necessary procedures and furnishing of valid documents from concerned authorities. But there should not be any conditions that are difficult to meet,” Al-Mutairi adds.
Manie Al-Manie says the present conditions and bureaucratic procedures of the fund make it impossible to take advantage of the increase in personal loans. “Hence, I am seriously thinking about taking loans from a local bank,” he says.
On his part, Saud Al-Rokban, a teacher, suggests that the application form for taking loans from the fund must contain a column that specifies that the fund will do the necessary steps to build residential units in cooperation with the concerned agencies, including the ministries, banks and real estate developers.
“The citizens should be informed about the details of the projects through advertisements in print and visual media. In my opinion, the housing problem of thousands of citizens, who have been waiting for personal loans for decades, could be solved in this way within a span of one or two years,” he says.
According to financial and real estate reports, there are about 5 million housing units at present in the Kingdom. The shortage of housing units and rapid growth of the population necessitate the construction of more than 1.5 million housing units over the next 10 years. The housing problem could be solved to a considerable extent if the government and private companies built as many as 275,000 housing units a year, the reports indicated.
Abdul Rahman Al-Samari, an economic expert, says that the royal decrees to increase funding of the real estate sector and the ceiling of personal loans as well as the subsequent formation of an independent Ministry of Housing would play a crucial role in addressing the acute housing problem in the Kingdom. “The annual increase of three percent in population and growing migration to cities coupled with the fact that those below the age of 30 represent about 60 percent of the population are factors that highlight the significance of effective implementation of the royal decrees in realizing dreams of more citizens to own houses of their own,” he said, while calling for easing the loan procedures from both the fund and local banks.
