Saudi Banks Real Estate Loans Annual Increase Of 13 Percent

Real estate loans from Saudi banks reached SR747.2 billion ($199.24 billion) in the third quarter of 2023 – an annual increase of almost 13 percent.

The data, which comes from the Kingdom’s central bank, shows the expansion can be credited to government-supported initiatives promoting Saudi home ownership as well as the significant rise in construction activities within the Kingdom.
To enhance home ownership affordability for Saudis, approximately 72 percent of the Kingdom’s overall real estate financing agreements between the first quarter of 2017 and the corresponding period in 2023 received support from diverse subsidy programs, as stated by Mansour bin Madi, CEO of the Real Estate Development Fund.

The official highlighted REDF’s pioneering role in shaping a financing market that increased opportunities for home ownership beneficiaries.

Additionally, it facilitated collaboration with partners and financing agencies to create programs aligned with the fund’s objectives.

Real estate loans accounted for 29 percent of Saudi Arabia’s bank loans, with 21 percent directed to corporate entities and the remaining 79 percent designated for retail. Despite the greater allocation to individuals, corporate loans exhibited a higher growth rate during this period, increasing by 17 percent compared to 12 percent for retail.

Approximately 97 percent of real estate loans to individuals in Saudi Arabia are provided by the banking sector, with the remaining loans originating from specialized home financing companies.

A Deloitte report on Saudi Arabia’s mortgage market highlighted that the inability of home finance companies to cross-sell mortgages alongside other products, as done by commercial banks with extensive branch networks, constrained their ability to expand their customer base.

Finance companies provided real estate loans amounting to SR27 billion, indicating an almost 1 percent increase during this period. This economic activity accounted for 33 percent of their total lending portfolio.

Historically, there has been a disparity between available financing options and the affordability of housing provided by private developers, resulting in constraints on home ownership for Saudi households, as per a research document by Deloitte.

On the flip side, new residential mortgage lending provided by banks for individuals from July to September has experienced a 38 percent decline compared to the corresponding period of 2022, attributed to higher borrowing costs that can increase the expenses for borrowers engaging in mortgage loans.