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Saudi Arabia at the forefront of a rise in Gulf state mortgages
Regional markets are eying Saudi’s anticipated new mortgage law, as KSA is expected to lead the mortgage industry following the new legislation.
May 13, 2010 9:56 by Rasha Reslan
In anticipation for the upcoming Saudi Mortgage law, expected in the next few months, many neighboring housing markets have been taking notice at how Saudi Arabia’s new law will affect them with many experts forecasting the Kingdom to take center stage once the law becomes a reality.
According to R. Lakshmanan, CEO of Bahrain-based Sakana Holistic Housing Solutions, Saudi Arabia’s mortgage sector is set to lead regional growth as the Kingdom’s burgeoning housing sector takes shape.
Lakshmanan explained that despite Saudi Arabia’s economy being the largest in the GCC. Mortgage borrowing in the Kingdom is relatively low, but still provides massive prospects.
“ There is a big opportunity for the Saudi market to be a best-practice platform for the region’s mortgage sector. The Kingdom’s opportunity curve points due north, with real estate development buoyant, consumer interest high and a national lending culture that is in its infancy,” Lakshmanan said.
The market-first Saudi Arabian Monetary Agency (SAMA) defined guidelines look to provide a legal and regulatory framework for conducting real estate financing and related activities by banks and finance companies operating in the Kingdom.
“Saudi Arabian Monetary Agency has recognized the opportunity and taken the lead to develop a best-practice industry model in the shape of the new Mortgage Law,” Lakshmanan added.
The business or mortgages in the Kingdom is expected to prove to be a very lucrative one with an estimated two percent of Saudi Gross Domestic Product (GDP) forecast for mortgage lending when the law takes effect.
Lakshmanan also said that the regional mortgage market is the envy of many mature markets as it is still in its embryonic stage but added that in this stage the regional market can grow mindful of what and what not to do, as there is room to allowing the regional mortgage market to take the right shape while also stressing a responsible approach.
“We must take a responsible approach to structuring the mortgage market, and Saudi Arabia could be our canvas,” he said.
The CEO also recommended that regulation; risk management, corporate governance and competition are crucial for sustainable growth.
“The new law is designed to encourage wider participation in the Kingdom’s mortgage finance market. It is important that the consumer has choice, but it is equally important that the players take a collective responsibility for best-practice and creating public awareness,” Lakshmanan concluded.
One such opportunity for sharing expertise ahead of the debut of the Saudi mortgage law, is the upcoming GCC Mortgage Summit 2010, the conference will run June 2nd and 3rd at the Gulf Hotel, Bahrain.
The summit is pegged to attract more than 100 GCC trade professionals, real estate developers, and real estate service providers which will be on hand to provide legal, research, insurance and rating information to interested participants.