A nation of have-nots: 40% of Saudis don't have access to real estate loans
Forty percent of Saudi citizens are not eligible to obtain real estate loans from Saudi banks due to their low income, a banking expert told local media.
The property loan portfolio at Saudi banks grew by 178.5 percent in a five-year period to reach SR41.5 billion in Q2, 2013 compared to SR14.9 billion in 2008, Talaat Hafiz, secretary general of Media and Banking Awareness Committee of Saudi Banks (MBAC), said.
“This trend expresses keen interest of Saudi banks to expand property funding facilities, notably after the approval of legislations related to the real estate sector,” he said to Arab News. He expected that demand on these loans would grow when mortgage systems and housing funding legislations come into force after two years.
If the legislations are applied, they will regulate legal relations between dealers, whether donors or grantees, he said.
The Saudi banks are qualified enough to deal with this type of loans as they (banks) have long-standing experiences and procedures that fully suit with these regulations, he pointed out.
As soon as legislations come into force, the Saudi banks will witness a remarkable growth in property loans to face the growing demand from all community members, especially the house ownership percentage is not more than 40 percent taking into consideration that the bigger portion of Saudi population is under 30, he said.
He added that the development plans have indicated that the Kingdom is currently in need of 1.25 million housing units, which are projected to double by 2040 to reach more than 4 million units.
The banking expert said the Saudi banks are used to diversify consumer loans with special emphasis on real estate loans on the feeling that the majority of community members are resorting to this type of loans in a bid to save large sums of money paid in the form of rentals, which swallow 40 percent of their annual incomes, he said.
Professor of Economics Salim Ba Ajaja said most of Saudi citizens were of low-income, which do not meet conditions set by the local Saudi banks to get the required funds, notably in terms of salaries that have been fixed by many banks at SR8,000 as minimum.
The commercial banks are not following the proper direction regarding bank finance, notably since there is a big segment of Saudis whose monthly salaries are less than SR8,000 and, therefore, cannot afford to buy property through the bank’s real estate loans, he pointed out.
Earlier, a SAMA (Saudi Arabian Monetary Agency) report said the volume of consumer loans given by Saudi local banks rose by 22 percent to reach SR321 billion in Q2, 2013 compared to the same period last year.
Loans given to purchase car and equipment rose to SR61.8 billion while loans for real estate stood at SR41.47 billion , SAMA said in its report.
- Sale prices in Abu Dhabi's residential property sector up by 17 percent in H1
- Unholy spending? Luxury leasing options on the rise in Mecca
- Ajman: a viable, more affordable property market?
- Putting things in perspective: how many apartments in the Middle East can Ronaldo buy with his World Cup salary?
- Sorry Dubai: why London's pricy property is still number one for ME investors