Subsidized housing loans
Opinions may vary about the Housing Ministry’s efforts to create viable solutions for eligible citizens to own houses. However, the subsidized loan scheme for 430,000 Saudi families wait-listed for housing loans constitutes an important turning point in the history of housing in Saudi Arabia.
The authorities have instructed real estate financers and local banks to make the terms for these subsidized loans lenient, which makes them a feasible option under the Real Estate Finance Regulations. Although there is no significant difference between the existing mechanisms for availing such loans, the subsidized loan system is expected to serve a larger number of beneficiaries within shorter waiting periods.
The subsidized loan is one of the most important housing products embodying public-private partnership. The loan has several positive elements, such as easing pressure on citizens who were seeking direct housing loans from the Real Estate Development Fund (REDF).
Saudi banks and finance institutions had disbursed real estate loans worth SR 220 billion by the third quarter of 2017. This certainly falls short of the desired target, considering that some 1.3 million people are on the waiting list of the Ministry of Housing and REDF.
In the past, the REDF solely shouldered the responsibility of granting real estate loans. It faced several difficulties in recovering the dues and also in meeting the demand. With the significant changes in the real estate borrowing mechanism, these shortcomings are expected to be addressed, easing the pressure on the REDF.