Saudi mortgage law success depends on implementation
Saudi Arabia has chosen the perfect time for the enactment of the mortgage law because it has the benefit of hindsight to avoid mistakes made in other economies, said Capitas Group International, a Jeddah-based management firm specializing in the Shariah-compliant finance industry.
Nasser Al-Nubani, Capitas’ executive vice president and general counsel, said the effectiveness of supporting regulation in managing and implementing this legislation will be the key measuring stick of the success of the Mortgage Law. Indications are that the Saudi Arabian Monetary Agency (SAMA) will be responsible for establishing the regulations that will support the mortgage law once it is enacted.
Currently mortgages only make up one percent of the country’s GDP and only 2 percent of bank assets.
Therefore, developers have shied away from building homes that meet the needs of consumers who are unable to purchase on a cash basis.
Unlike banks, which offer multiple lending products, are mainly motivated by capturing a consumer’s deposit relationship, and are restricted by overexposure to real estate, mortgage finance companies operate on a more targeted business strategy.