Real Estate - Updates
The IMF forecasts 4.4% growth for the Saudi economy this year, describing it as «a reasonable and achievable rate,» noting that key interest rates are reasonable and balanced and that it is unlikely that the Federal Reserve’s reduction (the U.S. central bank) of bond purchases is likely to affect the Kingdom’s monetary policy, adding that the Kingdom’s interest rate is reasonable, balanced, and achieves its objective..
This was clarified by Fahad Al-Mubarak, Governor of the Saudi Arabian Monetary Authority (SAMA), on the sidelines of a recent press conference held at the institution’s headquarters in Riyadh to mark the release of SAMA’s 49th annual report, during which he addressed a number of topics, most notably real estate financing and various types of loans.

Private Sector Growth
The Governor of ”SAMA” said that the Fund’s inflation forecast for the Kingdom is 3%, noting that the Kingdom’s real gross domestic product grew by 3.8% in 2013, a rate higher than the global economic growth rate for the same year, which stood at 2.9%, while the private sector grew by 5.5%. He explained that the growth achieved by the Kingdom’s economy is based on continued government investment spending, particularly in infrastructure projects, and the continued rapid growth of the private sector as a result of achievements in modernizing and developing systems and improving the business environment, which have bolstered domestic and foreign investment, in addition to the support provided by local banks
Bank Interest Rate Regulations
Regarding the Saudi Arabian Monetary Authority’s study of lending interest rates in the Kingdom relative to their current levels, the Authority’s Governor, Dr. Fahd Al-Mubarak, explained that there are regulations governing interest rates within the Kingdom’s banking system—regulations that are transparent to every bank and require it to do so with every customer. He said that, given the differences in practices among banks, the Authority has recently established the latest standards and new regulations, which will be implemented in the very near future—within a matter of months—to ensure transparency and discipline. Customer protection regulations have also been issued; there are specific regulations and standards that the banking system must apply to uphold the principles of transparency required for any loan, and he expects these to have an impact on practices and foster a correct understanding among all parties.
Mortgage Financing
Regarding real estate financing in the Kingdom by banks and independent companies, Dr. Fahad Al-Mubarak stated that this activity has a long history in the Kingdom and that modern regulations have been introduced to keep pace with it and develop the sector in a way that benefits all parties involved. Executive regulations for these systems have been issued, andauthorized to operate under them. He anticipated that the implementation of mortgage and financial leasing systems would begin in accordance with the announced regulations, particularly following the issuance of approvals for a number of companies to engage in this activity, which will provide greater security, transparency, and protection for all parties involved in this sector in the coming.
He praised the Kingdom’s sovereign rating of AA —an upgrade from AA with a stable outlook—recently awarded by Fitch Ratings, emphasizing that the Kingdom is among the few global economies to have received a rating upgrade.
Expected Impacts
Al-Mubarak denied that there would be any impact on financial dealings with Qatar following recent events, noting that the Kingdom’s investments total 2,700 billion riyals, of which 194 billion is in foreign currency, and that there are also cash reserves and bank deposits.

He noted that local banks were only minimally affected by the global financial crisis, and that the institution’s portfolio was among those least affected by the crisis due to prudent investment policies, He noted that the Kingdom was among the first countries to implement the Basel III principles, and that all banks adhere to these regulations.
Fiscal Surplus
During his speech at the conference, Al-Mubarak explained that in 2013, the Kingdom achieved an actual surplus in the state budget estimated at approximately 18.3 billion riyals, representing 6.5% of GDP, noting that the level of public debt had declined to 75.1 billion riyals, representing approximately 2.7% of GDP,adding that the Kingdom achieved a current account surplus in the balance of payments estimated at approximately 486.8 billion riyals, representing 17.4% of GDP, compared to 22.4 % last year,He noted that the inflation rate rose from 2.9% in 2012 to 3.5 in 2013, stating that the increase is under control, and said «According to the latest data released by the General Authority for Statistics and Information, the annual rate declined to 2.8% in February 2014.«
Financial Leasing
Regarding the financing sector, Al-Mubarak revealed that »SAMA« issued the regulatory regulations for the financial leasing system in coordination with the Ministry of Justice, in addition to issuing the regulatory regulations for the system governing finance companies. He explained that the regulations set a maximum limit for real estate financing not to exceed 70% of the value of the residential property covered by the real estate financing contract, noting that the regulations established a regulatory framework for real estate refinancing, thereby laying the groundwork for a secondary market that will help provide the necessary liquidity and reduce financing costs for consumers, He explained that the Public Investment Fund has contributed to the ownership of the Saudi Refinancing Company with a capital of 5 billion riyals.
Consumer Protection
Regarding the Saudi Arabian Monetary Authority’s efforts to protect consumers through the establishment of a dedicated department—out of its commitment to safeguarding the rights of customers in the sectors it oversees, addressing their complaints, and improving the quality of services in those sectors—emphasizing the Authority’s commitment to receiving all complaints, to which it gives great attention, in order to protect customer rights and raise the standard of services provided to them.
Al-Mubarak concluded by saying, »The results for the beginning of the year are lower than that, but for the year as a whole, the Fund’s projections are reasonable: inflation rates in the Kingdom will be lower than those in other emerging economies, and we believe the private sector will be the main driver of growth this year. Government investments will remain the main driver of private sector growth, and therefore I am optimistic.”