RIYADH, Jan 27 (Reuters): Real estate loans from Saudi banks reached SR747.2 billion ($199.24 billion) in the third quarter of 2023 - an annual increase of almost 13 per cent.
The data, which comes from the Kingdom's central bank, shows the expansion can be credited to government-supported initiatives promoting Saudi home ownership as well as the significant rise in construction activities within the Kingdom.
To enhance home ownership affordability for Saudis, approximately 72 per cent of the Kingdom's overall real estate financing agreements between the first quarter of 2017 and the corresponding period in 2023 received support from diverse subsidy programs, as stated by Mansour bin Madi, CEO of the Real Estate Development Fund.
The official highlighted REDF's pioneering role in shaping a financing market that increased opportunities for home ownership beneficiaries.
Additionally, it facilitated collaboration with partners and financing agencies to create programs aligned with the fund's objectives. This information was shared during the Housing Finance Conference in Riyadh in May 2023.
He also emphasized the significance of the Real Estate Financing Guarantees Program, designed to aid citizens who do not qualify for credit. Bin Madi mentioned that the program has assisted over 116,000 beneficiaries.
Real estate loans accounted for 29 per cent of Saudi Arabia's bank loans, with 21 per cent directed to corporate entities and the remaining 79 per cent designated for retail. Despite the greater allocation to individuals, corporate loans exhibited a higher growth rate during this period, increasing by 17 per cent compared to 12 per cent for retail.
Approximately 97 per cent of real estate loans to individuals in Saudi Arabia are provided by the banking sector, with the remaining loans originating from specialized home financing companies.
A Deloitte report on Saudi Arabia's mortgage market highlighted that the inability of home finance companies to cross-sell mortgages alongside other products, as done by commercial banks with extensive branch networks, constrained their ability to expand their customer base.
Finance companies provided real estate loans amounting to SR27 billion, indicating an almost 1 per cent increase during this period. This economic activity accounted for 33 per cent of their total lending portfolio.
Historically, there has been a disparity between available financing options and the affordability of housing provided by private developers, resulting in constraints on home ownership for Saudi households, as per a research document by Deloitte.
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