Saudi Arabia Approves Mortgage Law
| Date Published | 7/2/2012 |
| Author | Marja Hoek-Smit |
| Theme | |
| Country | Saudi Arabia |
Saudi Arabia Approves
Mortgage Law
On July 2, 2012, the Saudi Council of Ministers approved the
long-awaited mortgage law, which is comprised of five key areas; mortgage
registration, real estate funding (securitization), finance companies,
financial leasing and enforcement. The law is expected to stimulate the real
estate sector by allowing for direct lending against property compliant with
the Shura Council’s definition of loan providers as co-owners of the property,
defining foreclosure procedures in the event of mortgage defaults, as well as
making mortgage issuing more flexible. The new law also provides an indirect
means to capitalize vehicles that make mortgage loans. The Saudi Monetary
Agency (SAMA) will control the number of companies allowed to offer home
finance, with Sharia-compliancy extending to the rights of the mortgage holder
and not just the mortgage finance agreement. The law is expected to facilitate
the development of supportive laws, rules and regulations related to appraisal
procedures, deeds verification processes, and the development of
Sharia-compliant mortgage products. Currently, only 2 to 3 percent of home
purchases are financed by mortgages in Saudi Arabia.
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