If anyone in Saudi Arabia could be called an expert on mortgage laws, it’s Sheikh Abdullatif Al Shelash. Al Shelash is on the board of Saudi Home Loans and he says mortgage laws in the Saudi landscape have revolutionized the market. The Saudi Real Estate Refinance Company, which is the Saudi equivalent of U.S. mortgage finance business Fannie Mae, recently announced it has bumped maturity from 25 to 30 years on mortgages. It’s a move financial experts predict will increase flexibility for future homeowners in the Kingdom of Saudi Arabia.
Despite the Saudi government only making mortgages legal in 2012, Abdullatif Al Shelash says it’s already come a long way.
“I think the mortgage laws have developed really the market. Most Saudis used to believe that taking out a 20-year mortgage to buy a home was a significant financial hardship,” Sheikh Abdullatif Al Shelash says. “[It’s] the drop of interest rates in the last 10 years, [that] I believe this has made it possible for mortgage firms, like Saudi Home Loans, to significantly expand their market share and significantly improve their mortgage industry promotion.”
Al Shelash is on the money. According to the Al Arabiya news station, 70% of Saudi nationals are expected to be property owners within the next eight years. This is a significant jump from when Saudi Home Loans first launched and the majority of Saudi residents were renting. Only 22% were actually homeowners then.
Mortgage loans appear to be rising in Saudi Arabia in both the retail and business sectors, as per the data from the Saudi Central Bank. In the second quarter, the amount of mortgage loans provided by Saudi Arabia’s banking industry to private individuals and business clients climbed by 27% to SAR 638.26 billion (about $170 billion) from SAR 502.73 billion a year earlier.
Sheikh Abdullatif Al Shelash says Saudi Home Loans is only serving a certain fraction of the market, so there’s tremendous growth potential.
Saudi Homes Loans Continues To Spearhead Saudi Mortgage Movement
“Saudi Home Loans was the one that first ignited the industry, started giving out mortgages even before the mortgage laws had full effect and full approval, one of the first companies that actually received the license from Central Bank in Saudi to really do that,” Sheikh Abdullatif Al Shelash explains. “And it’s been really leading the market and doing innovative products and also serving its customers and all of that. But it helped in the beginning in encouraging investors that yes, mortgage business is a viable business, feasible in Saudi.”
As one of 11 board members of Saudi Home Loans, Abdullatif Al Shelash says he’s been working with the other board members to keep the company’s vision and objectives at the forefront of its mission. He says Saudi Home Loans studies the real estate market closely and follows consumer demands and trends. He stresses that it’s always important to strategize and clearly define where an organization is going.
“We can give you a mortgage over 15, 20, or 25 years, and you can actually go and live in your home today,” Sheikh Abdullatif Al Shelash says.
Abdullatif Al Shelash, one of the three partners of Alaqtar Real Estate Development Company, is a board member at Saudi Home Loans when he isn’t attending meetings. The firm is presently building Elite Villa in the Saudi city of Buraydah; the project features contemporary living with plenty of amenities for modern families in the Kingdom.
Last year, Saudi Home Loans stated in its 2021 report that its customer service continues to be a top priority for the brand. When Saudi Home Loans went public earlier this year, it garnered $423 million in its IPO on the Saudi Stock Exchange.
“This is a company that was the first company established in Saudi to assist Saudi nationals in buying their home on a mortgage,” Abdullatif Al Shelash says. “It was one of the very first mortgage companies to be established in Saudi Arabia. I was a founding member and I am still a board member.”
Al Shelash says Saudi Home Loans is on a healthy economic path, with an annual growth rate of 40% of net profits in recent years. He also describes it as one of the most profitable companies among nonbanking real estate finance companies. He adds that it’s all in an effort to change how Saudis view home ownership and purchasing land.
“One of the biggest obstacles to the mortgage industry historically was the house depreciation in Saudi,” Abdullatif Al Shelash says. “And why was there house depreciation in Saudi, while globally houses tend to appreciate over time? House depreciation in Saudi, when we started it as a case, when we were doing the mortgage industry or setting out the laws for that, was due to poor constructions and also no standardizations.”
How Saudi Home Loans Set a New Precedent
Al Shelash explains that there were no set standards at that time for every home constructed in Saudi Arabia.
“The windows are different dimensions because every house is being built according to individual needs; there is no big developer,” he explains.
That being said, globaldata.com reports Saudi Arabia’s construction market, which hovered around $120.4 billion last year, is heading for an average annual growth rate of more than 4% from 2023 to 2026. This means more demand for more mortgages will be inevitable.
Abdullatif Al Shelash admits he mortgages the homes he buys and will continue to do so. He says that those who have taken his advice have reaped financial windfalls.
“It’s a better use for your cash, because there’s going to be more appreciation,” he says. “Currently, the homes you bought in 2005 for 8 lakh Saudi Riyals [about $213,333] are worth 3 million Saudi Riyals. So they have made a tremendous wealth [gain], and they only [put down] 80,000 and started paying monthly mortgage installments. And they took the cash or the equity they used to have and put it in land that had appreciated almost to 2.5 million.”
Sheikh Abdullatif Al Shelash adds that Saudi Arabia’s economy is rising thanks to foreign investments and a jolt to the private sector.
“We’re seeing more companies coming into the market,” Abdullatif Al Shelash says. “We’re also seeing the opening to international investors, liquidity coming into the equity market. That in itself, I think, gives [a] good prediction of [the] coming increases in the equity market in Saudi.”