Saudi Arabia's central bank governor, Mohammed al Jasser, says the kingdom's first mortgage law is likely to be unveiled in the next few months, boosting the property industry and allowing banks to diversify their balance sheets. "I'm optimistic that in the next few months the law will be issued," Mr al Jasser said in Riyadh at the weekend. "It will be a qualitative jump in the way we finance housing in the country and in the way we use financial instruments that are linked to the housing market."
Saudi Arabia is suffering from a shortage of housing units, shielding the kingdom from corrections in the property markets of other Gulf states such as the UAE, Banque Saudi Fransi said in a report on January 13. Property prices in Dubai fell about 50 per cent from their peak, according to Deutsche Bank estimates. The Sharia-compliant legislation, which has been discussed for the past two years, will consist of five parts, Mr al Jasser said.
It will define the terms of mortgages, how they are designed, how they are granted, how companies are licensed and how procedures will be enforced. The draft law is being studied by the council of ministers before going to the Shura Council, the country's consultative assembly, for final approval, Mr al Jasser said. "We expect demand for new housing will continue, steered by the indigenous population," John Sfakianakis, the chief economist at Banque Saudi Fransi, said in the report.