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New KSA Mortgage Laws Significant

New KSA Mortgage Laws Significant

Saudi Arabia’s announcement of five new laws will affect homeowners and businesses when they come into effect.


The new laws issued by the Saudi Council of Ministry will have a very significant impact on business and mortgage owners in the country and will change the finance industry, according to a leading law firm.

The new regulations, which were announced on July 1st but won’t come into effect until around the start of October, includes five new laws but it is the Real Estate Mortgage Law that local businesses believe will have the biggest effect.

Hesham Al Homoud, head of local law firm Al Tamimi & Company’s Corporate and Commercial Department in Riyadh, said: “The introduction of these new Laws has been keenly awaited for some time. A draft of the Real Estate Mortgage previously sighted by us, provided for the introduction of a system under which mortgages over Saudi land could be registered in favour of financiers and the registered mortgagee would have priority rights against third parties.

“We also expect the other laws included in the package to have a very significant impact upon the finance industry in KSA, both in terms of regulation and the way in which banks and other finance providers conduct business in KSA.”

But specifics of the new law remains ambiguous while copies are yet to be published, leading businesses and homeowners to wait for the final regulation to be clarified.

Hossam Al Rashoudi , CEO of Maskan Arabia, said: “It is part of regulating the real estate market; this law is very important. However, the law is still not clear, we are still waiting for the final resolution.

“Developers still have concerns; the Saudi Arabian government will issue regulations and licenses for mortgages based on the Islamic lease financing model in August. However, when it will be published and introduced, it will definitely show the predicted results in the short and long term. Demand is strong because a growing young population has faced rising rents over the last four years. In addition, it will improve the housing supply and provide social stability.”

The new mortgage law won’t just affect current and prospective homeowners; Al Rashoudi predicts it will also be felt by local businesses.

“When the new mortgage rules are initiated and introduced into the market, as developers today, this will ease up the sales of units, knowing that more people will be legitimate for finance, since it is not tied up to the pay roll only.

“Previously, buyer’s faced difficulties in getting loans and housing finance, but today most segments in the market will be able to apply and have the opportunity to have mortgages, sales will increase, and it will hopefully have a positive impact in the long-term. Most banks are also likely to be cautious in their approach to mortgages because it is unclear exactly how the foreclosure process will be implemented.”


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