Saudi Arabia, which is spending about $500 billion to build infrastructure and industry, said its cabinet approved the kingdom’s first mortgage law, more than a decade after it was first proposed.
The law stipulates the regulations to establish mortgage companies and their activities, state-run Saudi Press Agency reported today, citing Minister of Culture and Information Abdulaziz Khoja after a cabinet meeting.
The mortgage market in Saudi Arabia, the biggest Arab economy, is the least developed among the six Gulf Cooperation Council states, CBRE Group Inc. said in March. Only 2 percent of home purchases in the kingdom have been financed through mortgages, compared with 17 percent in the United Arab Emirates and 70 percent in the U.K., according to CBRE.
The law is part of an overhaul of the kingdom’s home finance market, regulating all parts of the industry: from registering mortgages to allowing judges to prosecute police officers who fail to carry out eviction orders. It’s expected to encourage banks to lend as it would ease the concerns of lenders discouraged by previously unclear regulation that could lead to lengthy court disputes in cases of default.
The Tadawul Real Estate Development Industries Index rallied 5.5 percent ahead of the announcement. Dar Al Arkan Real Estate Development Co., the kingdom’s largest publicly traded developer, surged 9.6 percent, while Saudi Real Estate Co. increased 7.2 percent and Emaar Economic City gained 7.2 percent.