Over recent years, there has been a lot of debate surrounding the shortage of housing available in Saudi Arabia.
The issue roots back to the 1980s where Saudi Arabia experienced an economic boom and large amounts of land was given away leaving little land was left for urban developments by the government.
However, the situation is rapidly evolving with the Saudi Government investing into new developments worth US$67 billion. This is to accommodate for the growing Saudi population as housing demand is expected to increase and at the same time address the housing shortages issue. Initiative is being taken in the form of altering mortgage laws which will safeguard Saudi Nationals and allow them to get property-secured financing.
According to SAMA, growth in retail real estate loans in Saudi Arabia has increased from 8 percent in 2008 to 18 percent in 2012. New opportunities are opening up for people looking to buy property in Saudi Arabia.
The new law
The Mortgage Law is a collection of five laws out of which three have been revised by the Saudi Arabian Monetary Agency. These are the Real Estate Financing Law, Supervision of Finance Companies Law and Real Estate Mortgage Law. One of the interesting aspects of these revisions is the creation of real estate mortgages which were not previously found in Saudi Arabia. It also means that more competitive products and financing will now be available to the Saudi population.
So what does this new law entail for buyers? The implementation of these new Mortgage Laws will control the records and creation of mortgages. It will also define the rights and obligations of all parties involved and outline conditions for termination of any mortgages. A legal framework put in place under The Mortgage Law will resolve any disputes between parties. The new law differs from previous practices in the sense that it protects investors from easily losing their investment on default payments, improves their trust in the system and increases the amount of finance available for the population.
Therefore, if you are thinking to buy a house in Saudi Arabia, now would be a good time consider as these new mortgage laws come into play.
Consider all your options
Besides the comfort of The Mortgage Law, it is important to evaluate the affordability of your home finance. This is of course dependent on the size of your desired property. A recent study carried out in Saudi Arabia concluded that 3 bedroom houses had the biggest demand in the market. It also mentioned that people with an average income on SR15, 000 could generally afford purchasing their own homes.
As a result, the best thing to do is discuss with your mortgage broker and see if you fit the criteria for purchasing an apartment or a villa keeping your preference and financial capability in mind. Compare all the various home finance options by providers in the market and don’t forget to ask about additional charges such as early settlements fees and upfront fees.
Examples of products currently in the market are the SABB Manazel Home Finance, a Sharia compliant loan with a finance amount up to SR 5,000,000 with 5% down payment and a 3% early settlement fee. Other products include, Al Rajhi Bank’s Build a Home and Buy a Land products which gives you the option of either buying land or constructing your own home rather than purchasing a developed property.
At the moment there is a positive mood surrounding the Saudi mortgage market. Studies have shown that around 60 percent of families living in the country expect to own their own homes in the next four years. If you have always wanted to purchase your dream home in Saudi Arabia, now is a great time to consider your possibilities.