Egypt, Japan discuss economic ties, preparations for TICAD conference    Real Estate Developers urge flexible land pricing, streamlined licensing, and dollar-based transactions    Madinet Masr in talks for three land plots in Riyadh as part of Saudi expansion    Egypt's PM tells Palestinian PM that Rafah crossing is working 24/7 for aid    Egypt's Sisi pledges full state support for telecoms, tech investment    EGP inches down vs. USD at Sunday's trading close    EGX launches 1st phone app    Escalation in Gaza, West Bank as Israeli strikes continue amid mounting international criticism    Egypt recovers collection of ancient artefacts from Netherlands    Egypt, UNDP discuss outcomes of joint projects, future environmental cooperation    Egypt harvests 315,000 cubic metres of rainwater in Sinai as part of flash flood protection measures    After Putin summit, Trump says peace deal is best way to end Ukraine war    Egypt, Namibia explore closer pharmaceutical cooperation    Jordan condemns Israeli PM remarks on 'Greater Israel'    Renowned Egyptian novelist Sonallah Ibrahim dies at 88    Egypt prepares to tackle seasonal air pollution in Nile Delta    Al-Sisi says any party thinking Egypt will neglect water rights is 'completely mistaken'    Egyptian, Ugandan Presidents open business forum to boost trade    Egypt's Sisi, Uganda's Museveni discuss boosting ties    Egypt's Sisi warns against unilateral Nile measures, reaffirms Egypt's water security stance    Egypt, Colombia discuss medical support for Palestinians injured in Gaza    Egypt, Huawei explore healthcare digital transformation cooperation    Egypt's Sisi, Sudan's Idris discuss strategic ties, stability    Egypt's govt. issues licensing controls for used cooking oil activities    Egypt to inaugurate Grand Egyptian Museum on 1 November    Egypt's Sisi: Egypt is gateway for aid to Gaza, not displacement    Greco-Roman rock-cut tombs unearthed in Egypt's Aswan    Egypt reveals heritage e-training portal    Sisi launches new support initiative for families of war, terrorism victims    Egypt expands e-ticketing to 110 heritage sites, adds self-service kiosks at Saqqara    Palm Hills Squash Open debuts with 48 international stars, $250,000 prize pool    On Sport to broadcast Pan Arab Golf Championship for Juniors and Ladies in Egypt    Golf Festival in Cairo to mark Arab Golf Federation's 50th anniversary    Germany among EU's priciest labour markets – official data    Paris Olympic gold '24 medals hit record value    A minute of silence for Egyptian sports    Russia says it's in sync with US, China, Pakistan on Taliban    It's a bit frustrating to draw at home: Real Madrid keeper after Villarreal game    Shoukry reviews with Guterres Egypt's efforts to achieve SDGs, promote human rights    Sudan says countries must cooperate on vaccines    Johnson & Johnson: Second shot boosts antibodies and protection against COVID-19    Egypt to tax bloggers, YouTubers    Egypt's FM asserts importance of stability in Libya, holding elections as scheduled    We mustn't lose touch: Muller after Bayern win in Bundesliga    Egypt records 36 new deaths from Covid-19, highest since mid June    Egypt sells $3 bln US-dollar dominated eurobonds    Gamal Hanafy's ceramic exhibition at Gezira Arts Centre is a must go    Italian Institute Director Davide Scalmani presents activities of the Cairo Institute for ITALIANA.IT platform    







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Saudi Mortgage Law To Diversify Banking Sector
Published in Amwal Al Ghad on 11 - 07 - 2012

The introduction of a mortgage law in Saudi Arabia will improve the housing supply as well as provide diversification of the banking sector, Fitch Ratings said Tuesday. However these benefits will not be instant because banks will approach the new market with caution.
Saudi Arabia will issue regulations and licenses for mortgages based on the Islamic lease financing model in August.
Mortgage demand is expected to be strong because a growing young population has faced rising rents over the last four years.
The rent subcomponent of the CPI has risen by 47 percent in the four years to May 2012, more than twice as fast as overall inflation. Total mortgage lending is a mere 2 percent of GDP and home ownership is only 30 percent of the population.
The jump in demand to buy houses now that mortgages will be available may trigger house-price inflation. The rise in house prices will be tempered by planned property developments that will help meet demand. Tight regulation on mortgages as well as a cautious approach by the banks will also help to dampen price rises.
The government is already undertaking an extensive house building program. Importantly, Fitch expects private-sector property development to increase now that there will be financing available for young Saudis. The government's Real Estate Development Fund offers subsidized mortgages to purchasers of affordable housing.
Moreover, Fitch said tight credit limits for personal loans by the Saudi Arabia Monetary Agency show the regulator is unlikely to allow a housing boom to get out of control. Rules for personal loans - including credit cards - cap total monthly payments at one-third of net monthly income. Loan maturities cannot exceed five years.
Most banks are also likely to be cautious in their approach to mortgages because it is unclear exactly how the foreclosure process will work. Furthermore, they are funded through short-term deposits, which limit the amount of long-term lending they will want to undertake, Fitch noted.
Nonetheless, some banks have already built up their presence in the housing loan market over the last 18 months.
The funding mismatch is not an immediate problem because short-term deposits tend to stay at banks for long periods, Fitch said. But banks are likely to search out longer term funding before building up large mortgage portfolios, it added.
The new regulation allows for the development of a securitization market, which could provide much of the financing - if it takes off, Fitch said. – SG
Saudigazette


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