The “subsidized loan” recently approved by the Real Estate Development Fund targets about 430 thousand eligible Saudi families on waiting lists, as the “subsidized loan” contributes to increasing the number of beneficiaries of the Fund's support and is an influential step for the issue of homeownership for citizens, as it will support banks and financing companies and enable them to increase the segment of their customers and beneficiaries of their services.

Subsidized Loan Mechanism

Saudi banks praised the march of the “subsidized loan”, which was recently approved by the Real Estate Development Fund, describing this march as a step towards achieving the ultimate goal, which is to solve the housing crisis in the Kingdom as soon as possible, and banks said that they view the “subsidized loan” as one of the options that fall within the executive regulations for real estate financing, noting that “the mechanism of this loan, including direct support from the Real Estate Development Fund, is not much different from the mechanism of the mortgage loan in the past.”

The mechanism of the subsidized loan, with its direct support from the Real Estate Development Fund, is not much different from the mechanism of the mortgage loan in the past. The innovation of the subsidized loan as one of the most important products that crystallizes the partnership between the government sector represented by the Ministry of Housing and the private sector represented by financial institutions, came to achieve several goals, and we see that these goals are being achieved on the ground, including reducing the pressure that the Fund suffered from earlier, when it granted mortgage loans directly to citizens, as well as accelerating the pace of lending, reducing the waiting period, which used to reach or exceed 10 years, to approximately five years now, in addition to enhancing the universality of benefit by increasing the number of beneficiaries of this loan.

Partnership with banks

The subsidized loan provided by the Real Estate Development Fund in partnership with banks and financial institutions has contributed to the growth of residential real estate financing by 27% by the end of 2017 for the first time in the past three years, and targets 100 thousand families in the current year.

The Real Estate Development Fund has also amended its loan procedures by signing partnerships with banks and financial institutions, with the aim of accelerating the beneficiaries“ access to their loans, which it succeeded in last year, by announcing the names of 85 thousand citizens to be able to obtain their real estate loans, and the Fund aims from partnerships with banks to reduce the waiting years, which previously reached 20 years, to be according to the new mechanism no more than five years, with its confirmation that the loan is subsidized by 100 %..

Loans and the Kingdom's Vision 2030

”All Saudi banks were keen to participate in the subsidized loan program, believing in their role in supporting the citizen and the renaissance of the country, and from here they quickly signed agreements with the Real Estate Development Fund, in order to participate in granting subsidized loans to their beneficiaries in accordance with the mechanisms and conditions set by the Ministry of Housing with the Fund, in line with the requirements of the Kingdom's Vision 2030.“

For his part, the Secretary General of the Banking Information and Awareness Committee and spokesman for Saudi banks, Talaat Hafez, said that ”all Saudi banks were keen to participate in the subsidized loan program, believing in their role in supporting the citizen and the renaissance of the country. Hafez added: “The subsidized loan came to achieve several goals, and we see that these goals are being achieved on the ground, including relieving the pressure that the Fund suffered from earlier, when it used to grant mortgage loans itself to citizens, as well as accelerating the pace of lending, and reducing the waiting period, which used to reach or exceed 10 years, to approximately five years now.“

Hafez added: "The subsidized loan came to achieve several goals, and we see that these goals are being achieved on the ground.

Significant shifts in the mechanism

<A real estate expert explained that the mechanism of real estate loans in the Kingdom is witnessing major transformations, similar to radical reforms, to eliminate the negatives that existed in it, and described the subsidized loan as a wonderful idea that has achieved many gains for all parties involved in it. He said: "What the Real Estate Development Fund was keen on in the subsidized financing mechanism, linking the value of the loan to the size of the citizen's income, to ensure his ability to pay later, and this feature did not exist in the old mechanism, which created issues in collecting fee installments.