Saudi Arabia’s banks may double real- estate financing this year as the biggest Gulf Arab economy overhauls mortgage rules and demand for housing increases, National Commercial Bank said.
Financing may climb to 60 billion riyals ($16 billion) from 29.3 billion riyals in 2011, economists Said Al Shaikh and Albara’a Alwazir said in a research report. Total housing stock may expand by 2.4 million units in the next 10 years, with annual demand rising to 264,000 units by 2020 from 195,000 in 2011, they said. National Commercial Bank, which is owned by the government, is the biggest lender in the kingdom.
“This significant growth in real-estate bank lending highlights a historical shift away from the conservative lending that has been practiced in previous years,” they wrote. “The mortgage market, upon the implementation of the mortgage law, has the potential to attract non-bank lenders.”
Saudi Arabia, the world’s biggest oil exporter, in July said its cabinet approved its first mortgage law, more than a decade after it was proposed. The legislation stipulates the regulations to establish mortgage companies and their activities. The Saudi mortgage market is the least developed among the six Gulf Cooperation Council states, CBRE Group Inc. said in March. The move could potentially encourage banks to offer home financing to a wider segment of the population.
Real-estate construction has been on the rise since King Abdullah announced in March 2011 a plan to spend 250 billion riyals to build 500,000 homes to tackle the shortage in supply at a time when other Middle East countries were facing popular unrest. Saudi Arabia’s $597 billion economy will grow 5.1 percent this year, the second-fastest pace in seven years, according to the median forecast of 17 economists compiled by Bloomberg.
Tadawul All Share Real Estate Development Industries Index has gained 27 percent this year compared with 7.4 percent increase for the benchmark Tadawul All Share Index. (SASEIDX)
To contact the reporter on this story: Deema Almashabi in Riyadh at firstname.lastname@example.org
To contact the editor responsible for this story: Shaji Mathew at email@example.com