- Title: SAUDI ARABIA: Property exhibition attracts potential buyers in Riyadh
- Date: 29th April 2014
- Summary: HOUSING ADVERT
- Embargoed: 14th May 2014 13:00
- Keywords:
- Location: Saudi Arabia
- Country: Saudi Arabia
- Topics: Business,Economy
- Reuters ID: LVA65YGKSJVRNRVMOQNV0PCO96D4
- Story Text: An exhibition of real estate and urban developments in Riyadh showcases luxury housing, but many Saudis find it difficult to obtain loans to buy property and the government last month set up a scheme provide housing aid to its citizens.
An exhibition of real estate and property development in Saudi Arabia has highlighted a growing problem in the Gulf state for low-income families - that of being able to afford to buy their own homes.
Saudi Minister of Housing, Shuwaish Al Duwaihi opened the Riyadh Real Estate, Housing & Urban Development Exhibition which runs from 27-30th April at the Riyadh International Convention & Exhibition Centre.
As the largest exhibition of its kind in the kingdom, it attracted not just property developers and construction companies, but also banking and investment companies among the exhibitors.
Property prices in Saudi Arabia are high and owning a house has become an obsession with much of the younger population.
Analysts estimate that about 60 percent of Saudi families among the country's population of about 20 million citizens do not own their own homes, despite the wealth of the kingdom. Rising rents have made it difficult for even middle class people to afford housing; many Saudis do not meet the criteria required for loans from banks.
''The majority if those who are in need of housing are from the class below the middle class, so when these people go to a finance company (a bank) the requirements are higher than what they have, so they can't achieve the demands, and there lies the problem. So if someone comes who has a salary of four, five, or seven thousand riyals and wants to buy a home, the house price including the funding fees exceeds one million,'' said Talal Al-Abdalla, General Manger of local company, A'AJ Investment.
For many of the visitors to the show, it was a chance to compare the terms and conditions of mortgages on offer from various Saudi Banks.
''The value of the property that I'm looking at is between 1,850,000 and two million Saudi Riyals. So of course if I want to get financing for it, it will reach around three million, and this would be on payments over 30 years. Frankly the solutions, for me, they're not up to my expectations,'' said visitor Abdullah Rashkhan, a Saudi pharmacist from Jeddah and working in Riyadh, married with no children.
Bader Al-Musaibeh, Vice President of capital markets at Maceen Capital in Riyadh, said the problem will continue to exist as long as funding remains in the control of the banks and profits are very high.
''Up until now funding is in the hands of the banks, returns and profit margins are still very high. Restrictions on the buyers are also high, what should be done is that mortgages should be regulated, there should be a legislator for the mortgage process and cooperation from the Housing ministry and those have the expertise. Actually prices aren't the problem, money is the problem.''
In mid-March, Saudi Arabia's government launched a new scheme to provide housing aid to its citizens, in the hope of ending a shortage of homes which has depressed living standards and is politically sensitive for the government.
After social discontent prompted uprisings elsewhere in the Arab world in 2011, King Abdullah announced a plan to build 500,000 homes in Saudi Arabia over several years. Some $67 billion of state funds were earmarked for the plan.
But the programme has been slow to get underway because of sluggish bureaucracies, difficulties in obtaining suitable land and the complexity of allocating aid. The new scheme, named ESKAN - the Arabic word for housing - aims to break through those bottlenecks.
Saudi families seeking assistance, in the form of state-subsidised home loans or subsidised sales of land or housing units, are being given two months to register on a website. The applications will be considered for three months and the ministry will then announce who is eligible for aid.
Al Duwaihi was quoted by local newspapers as saying all citizens who submitted requests through ESKAN and met the conditions would be allocated homes within seven months.
Director of Mortgages at Riyadh Bank, Abdul-Aziz Al-Nakhli, said there was a pressing need for mortgages for middle aged couples.
''The most important sector at the moment that require mortgages are people who are married, between the ages of 35 and 40. And they want to get to the second step, which is stability and owning a house, and their salary is between eight to 15 thousand riyals.''
It is not clear whether the Ministry of Housing will be able to stick to its timetable for approving ESKAN applications, and how long actual construction of homes will take. Nevertheless, the detailed conditions of the ESKAN scheme suggest the ministry wants to avoid bureaucratic delays by creating a straightforward, transparent system for allocating aid, and this could be a step forward from past programmes.
Applicants must not own a house and have not received aid from a state-subsidised housing programme in the past; applications will be given priority through a points system which takes into account factors such as family size, monthly income and age, and favours the most needy people.
Applicants will pay for their subsidised homes or land, or pay off their loans, in monthly instalments over 10 years through a 25 percent deduction of their monthly income. - Copyright Holder: REUTERS
- Copyright Notice: (c) Copyright Thomson Reuters 2014. Open For Restrictions - http://about.reuters.com/fulllegal.asp
- Usage Terms/Restrictions: Clip cannot be re-published.
