The Riyadh Chamber of Commerce and Industry, represented by its Real Estate Committee, discussed a number of issues, most notably the 30% down payment required by the system for those seeking real estate financing, which recently came into effect, during a meeting attended by committee members, real estate sector representatives, and officials from the Saudi Arabian Monetary Authority (SAMA).
In this regard, Hamad Al-Shu’air, a member of the Board of Directors and Chairman of the Chamber’s Real Estate Committee, said that the meeting comes within the framework of close cooperation between the Riyadh Chamber and the Saudi Arabian Monetary Authority, which aims to educate investors in the real estate sector about the real estate financing system and its implementing regulations, an effort that reflects the Authority’s interest and recognition of the important role the real estate sector plays in economic development. He noted that the meeting reviewed the real estate financing system and its implementing regulations, as well as the main obstacles identified by real estate professionals.
Speakers, panelists, and real estate professionals agreed on the need to address Decision 30%, as it slows down the real estate sector, and will deter many from real estate development and financing, in addition to the difficulty of its implementation and its incompatibility with the credit status and income levels of many mortgage applicants seeking to purchase property through a mortgage.
For his part, Thamer Al-Issa, Director General of Supervision of Finance Companies at the Saudi Arabian Monetary Authority (SAMA), noted that the decision is consistent with SAMA’s responsibilities, which include taking the necessary measures to preserve the soundness and stability of the finance sector and ensure the fairness of transactions within it, as well as taking the necessary measures toencourage legitimate and fair competition among finance companies, as well as to adopt appropriate measures to develop the finance sector, noting that global experiences—including the global financial crisis, particularly as it relates to the real estate sector—necessitated learning from them and establishing the necessary safeguards to prevent similar crises from occurring.
He noted that the Saudi Arabian Monetary Authority (SAMA) has given the real estate sector two years to adopt and implement the strategies and action plans it deems necessary to comply with the decision, He said that the fundamental principle of financing is to establish a specific down payment as a percentage of the property’s value, as is the practice in all countries around the world, adding “The 30% ratio that was decided upon is normal; the previous situation, in which no specific ratio was set, was an exception,” noting that this ratio will help create a strong real estate sector capable of achieving sustainable—rather than partial—growth.
Al-Issa emphasized that the Authority plays a role in protecting the rights of customers and Saudi banks by ensuring that the mechanisms governing their interactions, contract terms, and loan calculation methods are clear and transparent to everyone, as well as standardized across all banks, He also noted that the Saudi Arabian Monetary Authority is preparing a study to assess loan applicants’ ability to repay.
