After the Saudi Arabian Monetary Authority announced the completion of coordination regarding the «Convenient Mortgage» program for residential real estate financing, for a specific category of citizens with the Ministry of Finance and the Ministry of Housing, this is expected to give the real estate market a boost and vitality, as well as provide a strong boost to financial institutions and banks, which will be allowed to provide residential financing for up to 85% of a home’s value, and the implementation of the affordable mortgage will provide a strong boost to real estate development companies, especially with the upcoming implementation of the vacant land tax, scheduled for next Ramadan.
Mortgage Financing Policy
The program aims to provide a residential real estate financing product that contributes to achieving the national objectives of the real estate financing policy recently approved by the Council of Ministers, without compromising the requirements of banking sector safety or financial stability.
The Saudi Arabian Monetary Authority noted that the key features of this program include the beneficiary making a down payment of 15% of the residential property’s value and allowing commercial banks willing to finance the property to provide up to 70%of its value, secured by a mortgage on the property in accordance with the mortgage system, In addition, the bank provides additional financing of 15% against a guarantee from the Ministry of Finance to support and assist citizens in owning their own homes, bringing the total housing financing from banks to 85% of the property’s value.
Requirements of the Mortgage
Dr. Fahd bin Abdullah Al-Mubarak, Governor of the Saudi Arabian Monetary Authority, explained that the various aspects of the program’s requirements had been studied and discussed with the relevant authorities.
Al-Mubarak expressed his appreciation for the Ministry of Finance’s support in implementing this program and facilitating home ownership for citizens, Al-Mubarak also thanked the Ministry of Housing for its efforts, cooperation, and participation in coordinating this program, and expressed the Authority’s hope for continued cooperation with both ministries and the banks to finalize the regulatory procedures, develop the program’s details, and draft the bilateral agreements, and the bank contract templates for the «Affordable Mortgage» program, in order to ensure the effective implementation of this product and to safeguard the rights of all parties.
Support and Reservations
Meanwhile, a number of economists, businesspeople, and real estate professionals supported the "Affordable Mortgage" initiative, noting that it will enable thousands of citizens to secure housing and thus contribute to resolving the housing crisis, as it will provide residential mortgage financing products that help achieve the national objectives of the mortgage financing policy recently approved by the Council of Ministers, some economists have reservations about the implementation of the Subsidized Mortgage Program for Residential Mortgage Financing; following the Saudi Arabian Monetary Authority’s announcement that it had completed coordination regarding its program "which aims to provide a residential mortgage financing product that contributes to achieving the national objectives of the mortgage financing policy recently approved by the Council of Ministers, without compromising the safety requirements of the banking sector or financial stability.
Noting that the Soft Mortgage Program allows banks to provide residential financing at 85% of the property’s value; and that the subsidized loan will not alter the 70% housing-related loan amount, which protects the banks.They pointed out that the subsidized mortgage reduces the 30% down payment for real estate financing to 15%; this is tied to salary and is a burden on citizens" salaries.Economists noted that the problem of home ownership is not solely related to financing; but also to inflated real estate prices compared to the inability of more than 95% of Saudis to purchase; and that the subsidized mortgage will not make it easier for Saudis to buy their own homes.
The Saudi Arabian Monetary Authority had indicated that the main features of this program include the beneficiary providing a down payment of 15%of the residential property’s value, and that commercial banks willing to finance the property would be allowed to provide 70% of its value, in exchange for a mortgage on the home in accordance with the mortgage system. In addition, the bank provides an additional 15% in financingin exchange for a guarantee from the Ministry of Finance to support and assist citizens in owning their own homes; thus, the total housing financing from banks amounts to 85% of the property’s value.
