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COLLEGE OF BUSINESS

ADMINISTRATION SATTAM BIN

ABDULAZIZ UNIVERSITY KINGDOM

OF SAUDI ARABIA

Candidate's Declaration

I hereby declare that the work presented in the Graduation Project entitled

"A Study on Housing and Housing Problems in Saudi Arabia" in the partial

fulfillment of the requirements for the award of the Bachelor of Science in Business

Administration (BSBA) and submitted in the Department of Finance, College of

Business Administration, Salman Bin Satttam University, Al-Kharj, Kingdom of

Saudi Arabia is an authentic record of my own work carried out during a period

of October 2015 to December 2015 under the guidance of Dr Abdul Samad

Mohammed, Asst. Professor, Department of Finance, College of Business

Administration, Sattam Bin Abdulaziz University, Al-Kharj, Kingdom of Saudi

Arabia.

The matter presented in this Graduation project has not been submitted

by me for the award of any other degree of this or any other institute.

( Mohammed Abdullah Faisel Al-Qahtani )

This is to certify that the above statement made by the candidate is correct

to the best of my knowledge and belief.

( Dr. Abdul Samad )

Project Guide

Date :

The Graduation project presentation of Mohammed Abdullah Faisel Al-Qahtani ,

has been held on ……………………

Signature of Supervisor

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Acknowledgement

My deepest gratitude goes to my project guide Dr Abdul Samad

Mohammed, Asst. Professor, Department of Finance, College of

Business administration, Sattam Bin Abdulaziz University, for his advice,

guidance supervision and untiring support throughout the study. Inspire

of his busy academic schedule, Dr Abdul Samad Mohammed, has always

been kind to spare his valuable time for me, whenever I needed it. It is

because of his involvement and constant encouragement; I am able to

complete this work. It is indeed a privilege to work under his supervision.

I am indebted to supervisor , Dr Nabel Malel and other academic

Factually members at department of Finance , college of business

administration , Sattam Bin Abdualziz University for their helping and

co-operative nature.

I am grateful to the stuff members of the department of Finance ,

college of business administration , Sattam Bin Abdualziz University , AL

KHARJ , Department Library , Computer Laboratory and Office for their

cooperation and help.

I wish to thank to my friends and colleagues for their moral support ,

camaraderie , help to keep things in perspective and for their loving

support during my stay and lifting the moods whenever they arrived.

I would like to express my reverence and great admiration for my

patents , who have always been the guiding and encouraging force for

me. Above all , I am highly indebted to almighty God who blessed me

with spiritual support and fortitude at each and every stage of this work.

Mohammed Abdullah Faisel Al-Qahtani

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Abstract

Chapter 1 Contains an introduction to the project work. This

chapter deals with the problems of the study , data , methodology ,

scope of study and the objectives of the study.

Chapter 2 Provide literature review. Some of the previous work

carried out in the relevant area are covered in this chapter.

Chapter 3 Deals with an overview of the housing scenarios.

Various aspect is provided in this chapter like the housing scenario in the

global , in the Gulf Council Countries , and in the Saudi Arabia.

Chapter 4 Deals with an overview of the real estate companies in

Saudi Arabia. Various companies are discussed in this chapter.

Chapter 5 Discussed the bank profile in how they offering a house

loan to the citizen in Saudi Arabia . There are a some of the banks in KSA

are discussed in this chapter.

Chapter 6 Present the data analysis , result and discussion.

Each Question is taken separately and showing the percentage of each

answer. This chapter contains all the questionnaire of the affordable

housing in Saudi Arabia. Detailed graphs of the questionnaire result are

presented. Offers conclusion. It is a summary of the work and result.

Chapter 7 References of the project.

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Content

Title Page No.

Declaration 1

Acknowledgement 2

Abstract 3

Contents 4

Chapter 1

INTRODUCTION

1.1 Introduction 7-10

1.2 Research Problem 11

1.3 Scope of Study 11

1.4 Objectives 12

Chapter 2

Review of Literature 13-15

Chapter 3

Housing Scenarios

3.1 Housing Scenario Globally 16-21

3.2 Housing Scenario In Gulf Council Countries 22-28

3.3 Housing Scenario In Saudi Arabia 29-32

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Chapter 4

PROFLE OF REAL ESTATE COMPANIES

4.1 Kingdom Holding Company 33

4.2 Jeddah Economic Company 33-34

4.3 Olayan Real Estate Company 35

4.4 Zamil Real Estate Company 35

4.5 Dar-Al-Arkan Real Estate Development Company 36

4.6 Saudi Binladan Group 37-38

Chapter 5

PROFILE OF BANKS OFFERING HOUSING LOANS

5.1 Introduction 39-41

5.2 SAAB Bank 42

5.3 AL-AHLI Bank 43-45

5.4 AL-RAJHI Bank 45-46

5.5 Housing Schemes In Saudi Arabia 47-48

Chapter 6

ANALYSIS AND FINDINGS

6.1 Analysis 50-73

6.2 Conclusion 74-80

6.3 Appendix 81-87

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Chapter 7

REFERENCES

6.1 References Of The Project 88

6.2 References Of The Review Of Literature 89-90

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Chapter 1

Introduction :

Saudi Arabia has a shortage of owner-occupied residential housing,

particularly at the lower end of the income scale. In this research we will

consider the structural factors that have contributed to this situation,

along with the likely impact of the proposed mortgage law.

First, we will briefly consider the role of housing and home

ownership in an economy.

Housing is a key building block for economic development The

availability of housing increases labor mobility and hence employment

potential. Housing construction itself is labor-intensive and has a high

multiplier effect given the necessary auxiliary investment in roads,

electricity, sewerage, and water. Beyond this, home ownership

promotes wealth accumulation for lower-income families by enabling

them to more-readily build wealth through home equity growth. Home

ownership provides the

Best and most secure collateral against market fluctuations and

other borrowing, and yields a positive rate of return in the long run. By

creating stakeholders who demand or make additional investments in

their communities—in schools, parks and shops, for example—home

ownership can also encourage a better quality of life.

Housing markets tend to be illiquid In principle, real estate is both

an investment and consumption good. It can be purchased with the

expectation of attaining a return (an investment good), or with the

intention of using it (a consumption good), or both. Thus, a renter would

consume housing, while an owner-occupier would both

Invest in and consume it. The dual nature of the good means that it

is not uncommon for people to overinvest in real estate—that is, to

invest more money in an asset than it is worth on the open market. This

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phenomenon was evident in the US and some Western European

countries in recent years.

The main determinants of the demand for housing are

demographic, although other factors such as income, price of housing,

cost and availability of credit, are also influential. The core demographic

variables are population size and net population growth, though family

size, age composition of the family, marriage rates and net migration, all

play a role. Most real estate markets are illiquid, and the process of price

adjustment is slow because of the amount of time it takes to finance,

design, and construct new supply, and also because of the relatively

slow rate of change of demand. As a result of these lags there is a great

potential for disequilibrium in the short run.

Comparatively speaking, Saudi Arabia has the largest real estate

market in the GCC states, with more commercial (office, retail and

residential) floor space than all of the other GCC countries put together.

The current stock of commercial space is planned to increase manifold

with the residential sector also poised for significant growth.

Talking of the huge demand for residential units, several

businessmen and real estate investors have moved to buy plots of lands

to build residential apartments. This has also prompted several real

estate investors and businessmen to join hands in building apartment

blocks and sell flats under a lease program ending in ownership.

There has already been a boom in the real estate sector following

the recent Royal Decree issued by His Highness King Abdullah Bin

Abdulaziz, Custodian of the Two Holy Mosques to increase the limit for

personal loans from the General Housing Authority and the Real Estate

Development Fund from SR300,000 to SR500,000.

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Although the Kingdom is witnessing huge developments in the

construction sector, the housing market still suffers from a large

demand-supply gap due to the rapid expansion of the expatriate

community along with the domestic community and rapidly declining

household sizes.

"The Saudi housing market offers enormous potential for growth as

it unlocks its potential. Housing is primarily driven by domestic drivers of

demand. Young Saudis are in search of affordable housing throughout

the country which remains under-supplied. However important steps are

taken by the government to address supply mismatches," said Engineer

Fahed Bin Mohammad Al Moutawe, CEO of Ewaan Global Residential

Company, the leading real estate development company in the Kingdom

of Saudi Arabia which is constructing the Alfareeda Residential Project

currently being built in the north of Jeddah city.

Under the new Saudi Arabian Law, foreigners are now entitled to

allow a 100 per cent ownership of real estate properties in the Kingdom.

This allows for a more influx of funds and investment into the country

and helps further the development of real estate industry in the country.

Moreover, the majority of the Kingdom's populace does not have

their own houses and live in rented accommodation. As a result, Saudi

Arabia will need to construct over 1 million houses by 2014. This

demand could further escalate if the mortgage law to ensure easy

financing gets its final approval.

"The mortgage condition will certainly be key to prospective market

growth. With this mortgage law, prospective buyers will be integrated in

the target market and consequently, the potential of the residential real

estate will get bigger in Saudi Arabia. This will on the contrary change

the decreasing investment trend seen during the past decade.

Particularly, Jeddah and Makkah are likely to record much higher growth

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levels than the other cities of the Kingdom, largely because of the

current pent-up demand," added Engineer Fahed Bin Mohammad Al

Moutawe.

With the growing needs of a young population, the housing market

in Saudi Arabia has shifted its focus from palaces and luxury villas to the

needs of a changing society. With a population of more than 27 million,

the Kingdom is notably the most populated country in the Gulf. Demand

for housing surpasses the supply and in the coming years, demand for

affordable housing will go on outstripping for luxury villas as the

majority of the population have enough money for housing units in the

range of SR0.8 million and SR3.5 million.

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Research Methodology:

The data for the current study is from the secondary and primary

sources. The study did an intense review of various studies on the crisis

in the real estate market of KSA.

The primary data was collected by administering a questionnaire to

the cross section of Saudi citizens.

Scope of Study :

The present study was conducted in the Riyadh region of KSA, and

the realistic responses from respondents were 140 in number out of the

sample size of 200.

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Objectives

To study the real estate market in KSA.

To study the crisis in the real estate market of KSA.

To suggest possible solutions for the crisis in the real estate

market of KSA.

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Chapter 2

Review of Literature

Abdallah Ben Rubeian (2014) , It seems that allocating 250

billion Saudi riyals [$67.5 billion] to support housing projects and solve

the housing crisis in Saudi Arabia has been ineffective and inadequate.

The Housing Ministry still has no clear plan to resolve the crisis, despite

all that has been written and said. While many promises have been

made, all that the ministry has done to date does not suggest that the

housing crisis will be solved anytime soon.

The ministry started its projects by building 500,000 housing units, and it did not succeed in achieving that. Then came the “land and loan” policy to save the ministry from the mess. But the ministry did not learn from its mistakes. It started making promises and proclaiming that the solution lies in adopting the merit mechanism from the council of ministers.

Marwa Rashid, (2013) , Saudi Arabia's government has

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.

Youssef Alkwylit , (2003) warned in the newspaper "Al-Riyadh"

The housing crisis in Saudi Arabia will blow up several other crises, and

that the statistics published by King Abdullah bin Abdul-Aziz Foundation

for Developmental Housing put us in front of the bell serious warning

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that, and that solutions do not address the situation of its roots, but left

perceptions not up to the fact analysis, and in the article "The crisis will

blow up crises!" The writer says, "that issued by King Abdullah bin Abdul-

Aziz Housing Development Foundation that 60 percent of Saudi families

homeless and assume a house for those families (125) square meters in

wide-dimensional environment and this size is a must to take the

attention much higher because this figure scary and scary, and when the

organization believes it is impossible to take a loan deduct 50% of the

salary of a mortgage a month unless the salary (12,000) Real make any

installment (6000) and this is what is not as long as the average salary of

a high percentage of citizens do not exceed the payment of the premium

amount required, and this the imbalance will continue what plans have

been developed this fact and its implications for the future of the family

and her life takes into account in building a generation without financial

hardships or crises and function and the salaries of low-habitation ".

Sultan Muhanna Al-Muhanna , (2013) , Housing in its entirety

needs to complete systems can deal with the different aspects affecting

the housing .

Whether in the planning stages, programs or implementation or

follow-up and evaluation or management. It has been specialized to the

problem of housing local and international organizations and research

centers working in all aspects that affect the housing statistics, research

and publication and meetings at scientific conferences with the

exchange of experiences and information and that the search for

solutions is an ongoing process not subject to individual interpretations

or personal opinions ... and always finds planners and Applicants The

publishing solutions for their projects either in the design or

construction standards ways that are commensurate with the various

communities or identify needs or costs account ... or search for new

methods of construction or furniture.

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Jeff Roberts , (2010), Despite Saudi Arabia’s vast oil reserves,

multibillion-dollar budget surpluses and ambitious economic cities, real

estate development plans in the kingdom are not quite as advanced as

they first appear. Although luxury waterfront villas and gated

communities cater to a small percentage of the Saudi population of

around 22 million, research suggests a growing number of people across

the kingdom are suffering from a housing shortage that is getting worse.

Dominic Dudley , (2009) , Riyadh is starting to feel a little too

crowded for some locals these day, with complaints about traffic jams

now a regular feature in the newspapers. Unfortunately for the city’s

commuters, the problem is going to get worse before it gets better as

work ramps up on a six-line metro network this year. Despite promises

from the consortia building the network to keep disruption to a

minimum it is inevitable that there will be road closures and diversions

across the city between now and 2019 when it is due to be completed.

Carol Fleming , ( 2010 ) , Ideally when accepting a job to

work in Saudi Arabia, not only will housing be part of the standard

compensation package, but the employer will also provide the housing.

However in some cases the employee will receive a housing allowance

and is responsible for finding his or her own housing. If one is given an

option between receiving housing or a housing allowance, my

recommendation is to accept the housing.

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Chapter 3

Housing Scenario

Housing scenario Globally :

We live in turbulent times. It is an era of astounding change, where

we are becoming almost accustomed to fantastic feats of technological

wizardry, medical marvels and spectacular scientific breakthroughs.

Crucial questions are posed at a global level about demography, natural

resources, the environment and human culture. While some things old

in these areas are coming apart it the seams, other new things are

emerging. The boundaries between disciplines, industries, sectors and

social enterprises are becoming ever more blurred. Everything, we are

told, affects everything else. As the boundaries fade and the networks

grow, so the need for a more enlightened, holistic and future orientated

understanding of events, issues and opportunities arises. In this

complex, chaotic and uncertain world, the real estate industry can

scarcely be exempted. More than ever before, there is a call for leading

thinkers in the property field to look around and look ahead. Global real

estate scenarios do not claim to have provided the answers to the

future, nor are they a reliable predictive tool. The purpose is to raise

awareness. We live in turbulent times where major, or even minor,

events can radically change our lives. Success will depend on being

prepared for the unexpected.

The Driving Forces of Change All the dimensions of change

Frequency, magnitude ,complexity, rapidity and visibility – are

happening at an ever-accelerating pace. In the past, there has been a

discernible pattern to change. This time, however, it is different, for

change is far less sequential and certain, showing much greater

discontinuity and unpredictability .To get a vision of real estate in the

future, it is first necessary to gain a vision of society in the future. This

requires an understanding of the forces – cultural, demographic,

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economic, environmental, governmental and technological – that are

driving change.

Cultural change

• Twin forces – homogeneity and diversity – are at play in

transforming society into something new and unexpected. On the face

of it contradictory, but in fact mutually supportive, the first is leading to

an awareness of the second. The greatest threat to future world order

and peace is the potential clash of civilizations, not of countries. Future

flashpoints will lie not along national boundaries, but where different

civilizations meet.

• A new business culture is emerging – one that is based as much

on principle – centered leadership as it is on the pure profit motive. The

21st century will see the culture of universal education for all people,

worldwide, and throughout their lives.

• There is a changing culture of healthcare stemming from such

issues as new medical discoveries, alternative or complementary

treatments, the duties and rights of patients and the roles and

responsibilities of providers.

• Advances in information technology raise cultural questions

about security, surveillance, control, access, privacy, crime, taxation,

propaganda and social colonization.

Demographic change

• The world’s population is growing, moving and getting older.

• Income disparities between rich and poor nations continue to

grow in a world of around 4 billion poor people, 2 billion aspirants and

something over a billion citizens of wealthy nations. The first group

creates less than 1% of world product, while the last creates over 85%.

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• The average age is increasing in the “industrialized” world and will

be around 40 by 2020.

• A “grey” future is faced by most industrialized nations as their

populations age and elderly dependency ratios rise.

• Immigration will become a crucial issue over the next 20 years, as

a tidal wave of people seek to surge from developing to developed

countries.

• The phenomenon known as “the global teenager” will become a

powerful demographic force. Connected, communicating, concerned,

cyclical, idealistic, ambitious, global youth could exercise enormous

social, economic and political power - but in what direction?

• The next 10 years will witness about half the world’s population

living in urban centers, almost 400 million people having homes in the

biggest 25 cities, and well over 300 cities in the developing world will

have a population of over a million.

Economic change

• A radical restructuring of the world’s economic order is taking

place. Economic globalism is the name of the game. The dynamics of this

new economic world, however, are largely untried, decidedly uncertain

and little understood.

• Capitalism is the only economic system that has been seen to

work anywhere, but even its foundations are shaking with the speed and

force of change, so that the

eternal verities of capitalism – growth, full employment, financial

stability, rising real wages – are threatened.

• The third of humanity, and the quarter of the landmass, which

was previously communist, is joining the old capitalist world with serious

problems in such sudden assimilation.

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• There will be a continued shift to an era dominated by

“brainpower” industries.

• Advances in technology, transportation and communications are

creating a world where anything can be made anywhere and sold

everywhere.

• The 21st century will be a period where there is no dominant

economic, political or military power, and no single country able to

design, organize and enforce the rules of the economic game.

• The main foundations underpinning economic growth will be the

development of a ubiquitous digital economy, increased research and

innovation, and improved skills and knowledge of the workforce.

• Above all, the businesses that flourish in the 21st century will be

those that master the art of getting information to and from their

customers.

• A new financial architecture in terms of global standards,

regulation, compliance, taxation, risk assessment and corporate

governance, will emerge.

Environmental change

• Environmental issues will form a major dimension of change and

the concept of “sustainability” will increasingly dominate the

formulation of public policy at all levels.

• Four basic questions will constantly be addressed: Is there a

crisis? Can the world feed itself? Is there enough water? Will there be

sufficient energy?

• Top of the environmental agenda will be the issue of global

warming, with consequent climate change and rising sea levels, resulting

from high levels of greenhouse gas emission due to fossil fuel burning

and land use change.

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• There will be a steady growth in the number of environmental

policy instruments introduced at international, national, regional and

local level.

• Attention will increasingly be focused on the shape, density and

functioning of cities.

• Organizations, of all kinds, will progressively have to demonstrate

a sound and effective approach towards environmental resource

management, and improved

performance.

Governmental change

• National governments throughout the world will become less and

less powerful. Power will be passed upwards to supra-national bodies,

and downwards to

• Fiscal and monetary policy will increasingly be determined by the

world’s financial markets.

• Governments generally will be expected to do less and not more.

• The accent by government will be placed on regulation to secure

effective, efficient and equitable provision of services.

• Persuasion will accompany regulation through better public

education, public relations and public disclosure.

• Electorates of the developed world will be more and more

disinclined to vote for increased taxation.

• Social security and welfare systems will come under greater

pressure, with a growing tension between those in work and those not

working.

• User charges, for erstwhile free or subsidized public services, will

be more common.

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• Cities will emerge as the critical focus of economic activity, of

governance and of social organization for the future.

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Housing Scenario In Gulf Cooperation Countries ( GCC ) :

Home ownership is a basic desire everywhere, including in the

countries of the Gulf Cooperation Council (GCC). However, the GCC is

facing a large housing gap, despite its relative affluence. Although

several GCC governments are currently building developments aimed

primarily at low- to middle-income households, these programs are

unlikely to yield the socioeconomic gains the region needs. Experience

shows that short-term policies to provide low-cost homes en masse are

not sustainable and result in a large stock of low-quality housing that

replicates the environmental problems of past decades. In addition,

these programs are often driven by government agencies with minimal

involvement by the private sector, leading to slower construction and a

less sustainable and lower quality housing sector overall. Instead,

policymakers should pursue a strategy in which housing and

socioeconomic policies come together in a holistic approach that builds

communities instead of just housing. To implement such a strategy,

government housing policies should aim for sustainable development

through environmentally friendly building standards and they should

improve urban communities by adopting new planning practices.

Governments should also engage private-sector developers through

public–private partnerships (PPPs), which can allocate resources more

effectively and transfer knowledge from private developers to

government agencies. Moreover, prudent real estate laws (such as

properly protecting the property rights of owners and residents) and

access to capital will be important if GCC housing policies are to achieve

higher ownership rates and socioeconomic gains such as greater income

equality.

Given the severity of the housing shortage — and the current

efforts of GCC governments to achieve other socioeconomic goals, such

as reducing unemployment and weaning residents from their

dependence on the state — a better approach to the provision of

housing is needed. Rather than focusing simply on bricks and mortar,

GCC housing policies should aim to build vibrant communities, create

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jobs, enhance social welfare, and ensure a healthy environment. The

right housing development strategy can lead to gains in each of these

areas. Governments need not invent this strategy from scratch. There

are success stories elsewhere from which GCC governments can derive

lessons, such as PPPs in Morocco, Singapore’s Housing and Development

Board, and Hong Kong’s use of environmental building practices. These

programs have resulted in successful housing projects, such as shared-

use complexes that combine housing, retail space, and office space,

along with recreational and educational facilities, green space, and

access to public transportation — all built with environmentally sound

designs.

Five factors will be critical to making public housing policy more

effective.

Apply sustainable urban planning and design principles Fundamentally

The right approach includes principles of sustainable urban

planning and design, including mixed-use developments that feature a

combination of residential, commercial, educational, and civic space.

Such developments foster a sense of physical and social community.

They provide open space that displays the community’s natural beauty,

along with easy access to transportation and social infrastructure. They

have amenities such as retail and work spaces within a reasonable

distance, to minimize the use of cars. Financially, the right design can

retain or increase the value of the properties being developed. It also

creates a range of employment opportunities both within and near the

community, which helps advance the socioeconomic status of residents.

Studies suggest that sustainable housing can deliver a range of

environmental benefits. Many buildings in the GCC region — and their

occupants — are notoriously inefficient in their use of space and energy.

Much of the high electricity consumption in these countries is

residential. In Kuwait, for example, residential usage represents more

than 65 percent of overall consumption. Yet solutions are available. For

example, sustainable elements such as proper insulation for external

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walls and roofs, double-glazed windows, and fitted shade devices can

reduce annual household electricity consumption by about one-third.5

Similarly, mixed-use zoning leads to numerous environmental

advantages; the most significant is a decrease in car travel, which can

greatly reduce air pollution and CO2 emissions. Access to public

transportation allows for greater mobility of residents, both within and

outside the community, and reduces pollution. Including design

components such as green spaces helps foster biodiversity and a vibrant

ecosystem.

Leverage public–private partnerships

Although, the public sector cannot solve the housing shortage on

its own, handing it off to commercial developers is not a realistic

alternative. Instead, PPPs are a potential solution that can lead to a

faster and more sustainable response. PPPs have already been used to

build necessary infrastructure and provide more effective public services

in areas such as healthcare and education. Structured correctly, such

partnerships can combine the investment funds and expertise needed to

execute and manage housing projects. They allow government assets to

be allocated across more projects. Also, they can build public-sector

capabilities by transferring know-how and expertise to relevant

government agencies, thus helping streamline the delivery process. As

with other areas where the public and private sectors intersect, this

form of cooperation will require mechanisms to ensure transparency

and efficiency. The Moroccan government, for example, has successfully

partnered with the private sector to help address the shortages in

affordable housing.

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Strengthen housing finance

Another structural limitation is the access to home financing in the

region, often because of underdeveloped financial markets and

regulations. In some cases, collateral requirements are extremely high.

For example, a mortgage borrower in some GCC countries must sign a

check for the total mortgage amount. Yet Shari’a (Islamic law) can

prohibit most banks from reclaiming a person’s house, even if the owner

defaults on a mortgage payment. As a result, many banks are hesitant to

extend mortgages. Governments often respond by providing soft loans

through local banks or government agencies. Such practices, while well-

intended, often erect new hurdles to the process of buying a home. Few

governments in the region have rigorous data on housing and

population characteristics (e.g., income, age, and social status). Similarly,

few have any kind of equitable distribution mechanism (i.e., targeting

households that are most in need). As a result, loans are unevenly

distributed. In Saudi Arabia, for example, the waiting time for loans can

reach 18 years. Yet implementing a new prioritization scheme — such as

a points system — can be difficult to sell politically. Government

bureaucracies also scare away commercial lenders. Governments have

an inherent interest in encouraging the private banking system to play a

lead role in financing house purchases. A vibrant residential mortgage

market would lead to higher home ownership and growth in the real

estate sector, and most important, would reduce the burden on the

government to increase access to housing. Addressing this challenge

requires a two-part solution. The first regards finance — governments

must develop financing schemes that more effectively target low-

income households, allowing them to purchase adequate and affordable

housing. The second is the legal aspect — mortgage laws must be

revamped to offer protection to low-income households, while still

preserving the rights of lenders.

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Diversify housing programs

Most GCC governments’ housing programs offer limited types of

assistance. The existing programs offer either land, direct financial

support, or a housing unit. This limitation has two drawbacks. First,

there is a mismatch between assistance and need. The current programs

assume that all applicants need a new housing unit. However, applicants

may already have access to existing housing units, such as their parents’

home, that require renovation to accommodate the growth in the

family. This mismatch may lead to the waste of valuable resources, and

missed opportunities to renovate existing units, some of which are

historic. Second, there is limited access to existing programs. Most of

these programs require the beneficiaries to repay over time the value of

the benefit. In some circumstances, the applicant’s income does not

allow the person to be a homeowner, leading to a denial of assistance.

Offering rental assistance programs would lead to better targeting of

assistance and more efficient use of resources. A large menu of

programs can be used by governments to ensure proper targeting and

efficient use of resources.

Implement efficient management

Housing programs are ambitious and will not succeed without

clear oversight in both the short and long term. A few countries with

successful sustainable housing policies, such as France and Singapore,

have created specialized agencies to deal with the supply, maintenance,

and management of public housing. For example, a specialized agency

can evaluate housing applicants to ensure that those who best meet the

eligibility requirements actually receive housing. In addition, these

agencies can ensure the adequate maintenance of facilities, to establish

a consistent and equal standard of housing over the years. Furthermore,

human capital is an important factor in housing management. The right

expertise must be in place within the different departments and

branches of the housing department. Experts with legal, technological,

research, and statistical experience, for example, can help manage the

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mismatch between demand and supply. To succeed, however, housing

programs need efficient and transparent institutional support that can

implement, monitor, and assess them. On the legal front, laws that

guide the actions of both tenants and owners can be especially useful in

ensuring the maintenance of housing units, well as the overall real

estate market mechanisms. As such, effective property management can

act as a buffer between owners and tenants, ensuring that all parties

involved are sufficiently engaged to guarantee best practices within the

housing market. In order to maintain the stability of the real estate

sector and attract investments for its development and growth,

governments must ensure the rights and responsibilities of landlords,

tenants, investors, and property service providers. A real estate

regulatory agency, similar to the Real Estate Regulatory Agency in Dubai,

is one approach to efficiently carry out this task. Such a body is able to

license, organize, and manage all real estate activities, real estate

agents, and developers’ trust accounts, along with rental and purchase

agreements. For example, by monitoring the fees demanded by real

estate companies, the agency can introduce more transparency and

accountability into the market, and eliminate incentives for some

people to pay or solicit extra for preferential treatment. In addition, a

regulatory body can regulate and supervise real estate associations and

media-related activities as well as circulate real estate research, studies,

and publications. It is also better able to maintain consumer and investor

confidence in the real estate market — a key priority for GCC countries’

growing real estate markets.

28

Each of the measures described in this report is insufficient alone.

GCC governments need to bring them together in a holistic approach to

develop sustainable policies that can relieve the current shortage of

affordable units and increase the socioeconomic benefits of public

housing. Instead of building mega-housing complexes using traditional

approaches, governments can redirect capital toward more

comprehensive solutions, and collaborate with private builders, banks,

and other stakeholders. In particular, these housing policies will provide

social inclusion, economic viability, and environmental sustainability.

The housing challenges in the region are profound. However, with the

right approach governments can transform these challenges into

opportunities to develop a vibrant and more affordable GCC housing

market, and so better meet the needs of the current and future

populations of the region.

29

Housing Scenario In Saudi Arabia :

30% of Saudi population own homes, global average 70%, UAE

home ownership 45% , 0.4 Million Shortage of households Demand 2.7

Million; Supply 2.3 Million , 1.0 Million homes to be created by 2015,

young and fast growing population, rapid urbanization and rising

personal income driving the demand. Construction industry in the

Kingdom on sound foundation and on the verge of major surge, says top

industry player The Saudi Arabia real estate industry is poised for

remarkable growth in the near future and is currently the fastest

growing construction industry across the Middle East. What with more

than $36bn of FDI and over $500bn of real estate projects already under

way, the Kingdom of Saudi Arabia presents one of the most lucrative

opportunities to tap into for regional and international real estate

investors.

The recent spate of developments in the Saudi Arabian real estate

sector are fueled by a robust economy of the Kingdom, and backed by

huge revenues from the oil sector leading to excess liquidity. More

importantly, one of the major boost to the sector is the liberalization of

property laws within the Kingdom. As per industry expectations, the real

estate sector's annual growth is expected to be maintained between

2011 and 2015 along the same rate. For its part, the Saudi Arabian

government has helped the cycle of growth through diversification. This

has helped in generating credit facilities and real estate investments,

leading to more construction and ultimately the demand has led to a

huge growth in the real estate sector.

One of the main drivers of the real estate market surge is the size

and rapid growth of population in the Kingdom. Saudi Arabia has been

among the fastest growing countries globally in terms of population over

the past decade. As a result, Saudi has a very young demographic profile,

with around 45% of the population currently aged around 20-25 years.

This young age profile and the rapid urbanization have been the major

demographic factors driving the real estate market.

30

Over all, the real estate scenario in Saudi Arabia is looking great,

with lots or promises especially in the next few years. As this upbeat

prediction remains, expect Saudi Arabia to be the bastion of real estate

development.

It seems that allocating 250 billion Saudi riyals [$67.5 billion] to

support housing projects and solve the housing crisis in Saudi Arabia has

been ineffective and inadequate. The Housing Ministry still has no clear

plan to resolve the crisis, despite all that has been written and said.

While many promises have been made, all that the ministry has done to

date does not suggest that the housing crisis will be solved anytime

soon.

The ministry started its projects by building 500,000 housing units,

and it did not succeed in achieving that. Then came the “land and loan”

policy to save the ministry from the mess. But the ministry did not learn

from its mistakes. It started making promises and proclaiming that the

solution lies in adopting the merit mechanism from the council of

ministers.

Unfortunately, the merit mechanism submitted by the Housing

Ministry and approved by the cabinet three weeks ago came with many

defects. It poured oil on the fire of already red-hot land prices. In other

words, the new policy exacerbated the problem it tried to solve.

The mechanism surprised people by requiring citizens to pay

between 50,000 and 150,000 riyals [$13,300-$40,000] for the land. This

came as a shock. Big landowners, who monopolized the large plots of

land, have obtained their land for free. And when the turn came for

needy citizens, they were required to pay a sum of money in return for

no one knows exactly what.

The new mechanism introduced to the already volatile market

those who had been outside it because they could not afford to buy a

home. The merit mechanism includes an income criterion and gives

priority to those with low incomes. That made it akin to a charity that

distributes housing, and not a lending mechanism to resolve the housing

31

crisis afflicting most of the middle class, including those with high

incomes.

For example, the mechanism gives the most points, that is, 20

(according to income) for those with a salary of only 3,000 riyals [$800] a

month. This means that someone making 3,000 riyals a month will pay

for a housing loan a little over 1,600 riyals [$426] a month for a period of

25 years. In effect, the mechanism violated another system preventing a

citizen from paying more than a third of his monthly income on a loan.

Perhaps the mechanism should have set a salary of 5,400 riyals

[$1,440] and above, so that the ministry could deduct the 1,600-riyal

monthly installments without the borrower paying more than a third of

his salary. For those with very low incomes, widows and the like, the

ministry could have set up a cooperative charity program instead of

adding that group of people to the ministry’s borrowers, either in

exchange for the land, the loan or both, where they do not repay the

loan because they can’t afford it.

A third point should be noted: A lot of people who did not benefit from

their ready-to-be-disbursed mortgage loans because they could not own

land had hoped to take advantage of those mortgages and that they

would be given priority. But the mechanism ignored that group of

citizens and didn’t provide them with land so that they could benefit

from the ready-to-be-disbursed mortgage loans from the real estate

fund.

This is a big deficiency in the mechanism. Someone who needed to

use his land and could afford a loan was not given a loan, while a citizen

with no land was given a loan. So the ministry has effectively added the

second group of persons to the first, and that made the situation worse.

The fourth point is that the mechanism has doubled the size of the

demand by bringing into the market those who had been outside it. It

did that before solving the problem of the land supply, which is the core

of the problem. By signing with commercial banks to give a citizen an

additional loan and by accelerating the spending of the real estate loan

32

fund, the ministry has poured oil on the fire. It supported the demand

side without a successful solution to the problem: the supply side.

Fifth and finally, the ministry postponed the solution to the supply

side by considering taxes on empty land within city limits. The ministry

has talked about that repeatedly for more than a year. Nothing suggests

that such a tax will soon be imposed.

The ministry should not have counted on a solution that is not in its

hands and that it cannot impose and that needs to be studied and

extensively debated by a number of agencies before approval, if it gets

approved at all.

It is worth recalling that the ministry has been working for four

years on a trial-and-error basis, which is not the way to resolve the

prolonged crisis. Both the ministry’s policies and programs currently

support the demand side and ignore the core and essence of the

problem: the supply side. Market reality has shown that every policy

taken by the ministry ended up raising land prices. If those policies

continue without solving the demand reality, not 250 billion riyals, nor

even more than that, nor tying people up with mortgages, will solve the

problem.

33

Chapter 4

Profile Of Real Estate Companies

Kingdom Holding Company :

The acquisition of high-value real estate, both in the Middle East

and internationally, has long been a priority for Kingdom Holding

Company.

KHC has a distinguished history of investing in iconic real estate

holdings and related concerns. Some are hotels but others are new

residential or business developments designed to attract global

attention. In some cases KHC takes a position in a project already

underway and supports it to completion, such as London’s ambitious

Canary Wharf development. Other projects are originally conceived and

commissioned, such as Jeddah’s recently announced Kingdom Tower,

Kingdom Riyadh Land Real Estate Project Jeddah Mega Real Estate

Project and Tower.

All, however, fit the KHC strategy of identifying the “best of the

best” worldwide, and promoting its interests by aligning KHC with the

concept of visionary and one-of-a-kind excellence.

Jeddah Economic Company (JEC)

Jeddah Economic Company Ltd., that was co-founded by Kingdom

Holding Company, in which it holds a substantial interest, is developing

the Kingdom City, Jeddah. The project will feature the over 1,000-meter

Kingdom Tower with approximately 5.3m square meters of new urban

development to attract business and tourism. The tower aims to be an

iconic marker of Jeddah’s historic importance as the gateway to the holy

cities of Makkah & Madinah.

Kingdom Tower Jeddah planning activities have attracted

worldwide interest. It will comprise more than 500,000 square meters of

34

floor space and feature a Four Seasons hotel, Four Seasons furnished

apartments, first-class office space and luxury condominiums. No official

floor count is yet supplied, but architects have stated there will be

approximately 50 more floors than the 163-floor Burj Khalifa tower in

Dubai, UAE. Kingdom Tower will also offer the world’s highest

observation deck.

Credit for the Kingdom Tower Jeddah vision goes to HRH Prince

Alwaleed, who was closely involved in all facets of the planning, design

and the selection of Adrian Smith + Gordon Gill Architects (AS+GG) as

principal architects. Prince Alwaleed, and the board were impressed by

the boldness and simplicity of the AS+GG design. Kingdom Tower’s

height is remarkable, and the building’s iconic status will not depend

solely on that aspect. Its form is brilliantly sculpted, making it quite

simply the most beautiful building in the world at any height.

The tower’s great height requires one of the world’s most

sophisticated elevator systems; the Kingdom Tower complex will feature

59 elevators, including 4 double-decker, and 2 triple- decker elevators.

Elevators serving the observatory will travel at a rate of 10 meters per

second.

The project also takes advantage of new energy conservation

technology. The tower is to feature a high-performance exterior wall

system that will minimize energy consumption by reducing thermal

loads.

The entire Kingdom City project on the Red Sea coast includes

residential units, commercial units, an international hotel, business

offices, educational centers, a diplomatic area, commercial centers,

entertainment and tourist facilities, and water sports activities, all within

a modern city located in a to be determined strategic location set to be

an attraction for business and tourism.

35

Olayan Real Estate Company Ltd:

Olayan Real Estate Company Ltd. (ORECO) was formed in 1976 as a

subsidiary of Olayan Financing Company to plan and coordinate the

Groups requirements and to acquire land and properties.

ORECO's activities were initially focused on the acquisition of land

parcels to cater to the Group's current and long-term needs. It has

evolved to undertake property development projects on its own and for

third parties. For example, in the mid-1990s ORECO developed its first

office and shopping complex, Riyadh's Dareen Commercial Center. The

complex houses the headquarters of two Olayan companies and a mix of

other office and retail tenants. ORECO has also developed supermarkets

for Safeway Tamimi. The company recently developed its second major

office and shopping complex, this one in Dammam on the Arabian Gulf

coast.

Zamil Real Estate :

This is the official website of "Zamil Group Real Estate Company".

We invite you to browse through this site to view the exclusive

residential and office commercial properties developed, owned and

managed by Zamil Group in Saudi Arabia and Bahrain.

Zamil Group real estate activities date as far back as the 1930s in

the city of Jubail, on the Eastern coast of Saudi Arabia and Al Manama in

Bahrain. The Group's diversification strategy focused on the services

sector, namely real estate which led to the formation of "Zamil Group

Real Estate Company" to develop and manage all residential and

commercial properties.

Zamil Group Real Estate Company operates prime properties in

very select locations in the cities of Al Khobar, headquarters of Zamil

Group, Riyadh, Jubail and Al Manama in Bahrain.

36

Dar Al-Arkan Real Estate Development Company :

Dar Al-Arkan Real Estate is a Saudi Arabian property development

company. It is the largest developer by market value in Saudi Arabia.

Based in Riyadh, it was established in 1994 by six business families with

real estate development experience in response to the demand for

housing from the rapidly growing Saudi population. From July 2002 to

January 2004, Dar Al-Arkan operated as a limited liability company with

a capital base of SR140 million (US$37 million). Dar Al-Arkan increased

its capital to SR5.4 billion (US$1.4 billion) through a private placement in

the domestic market in 2004 while converting to a partnership limited

by shares. Subsequent to the private placement, Dar Al-Arkan converted

to a joint stock company in 2005 (i.e. a company with a minimum of five

shareholders who are restricted from selling their shares (except with

respect to transfers to each other) for a period of at least two years and

can be listed on the Saudi stock exchange). The founding shareholders

own 70% of the company. In December 2007, the company listed its

shares on the Saudi Stock Exchange (Tadawul All Share Index) under the

symbol 4300. As of 31 December 2008, Dar Al-Arkan had total assets of

SR20.1 billion (US$5.3 billion), with shareholders’ equity of SR11.7 billion

(US$3.1 billion). Total revenues and net income reached SR5.6 billion

(US$1.5 billion) and SR2.3 billion (US$628 million), respectively. In

addition to its head office in Riyadh, Dar Al-Arkan has offices and

branches across KSA, including Mecca, Jeddah and Madinah. In total, Dar

Al-Arkan has seven branches and employs a staff of 450.

37

Saudi Binladin Group :

Overview :

The SBG was founded in 1931 by Sheikh Mohammed bin Laden

Sayyid (father of Osama bin Laden) whose relationship with the

country's founder, Abdel Aziz al Saud, led to important government

contracts such as refurbishing the mosques at Mecca and Medina.

In 1964, Mohammed bin Laden was commissioned to work on the

third Holy sanctuary of Islam, recladding the Dome of the Rock in

Jerusalem. After the death of Sheikh Mohammed in 1967, the group was

headed by Mohammed Bahareth, brother of Mohammed's first wife and

uncle of his oldest children. In 1972, Salem bin Laden, the eldest son of

Mohammed bin Laden, took over as his father's successor, with the

assistance of several brothers. Upon Salem's death in a plane crash in

1988, the leadership of the group passed to one of Salem's brothers,

Bakr, the current chairman, along with thirteen other brothers who

make up the board of the bin Laden group, the most important of these

being Hassan, Yeslam and Yehia. By 2002, the company had 35,000

employees worldwide.

Current activities :

The bin Laden group is represented in most Saudi cities — Riyadh,

Dammam — and in a number of capital cities in the region (Beirut, Cairo,

Amman, Dubai). According to a synopsis by the PBS news program

Frontline: in Egypt the SBG is headed by Omar bin Laden as Chairman,

Khaled bin Laden as CEO , Tarek Helmy as General Manager , and

represents that country's largest foreign-owned private equity group,

with over 40,000 employees. In Lebanon the SBG, represented by Yehia

bin Laden, has been holding negotiations with the local authorities for a

$50 million share in the project to rebuild the Beirut Central District

within the framework of the Solider Project and in conjunction with the

al Baraka Group and the bin Mahfouz Group. In London the SBG set up a

representative firm called Bine xport in November 1990. On 20

38

December 2005, the government of Saudi Arabia awarded a consortium

of Saudi and Emirati companies, including the Saudi Binladin Group, a

$26.6 billion contract to build King Abdullah Economic City. The Group is

constructing Abraj Al Bait Towers in Mecca and has been contracted by

Kingdom Holding Company to build the Jeddah Tower.

On 11 September 2015, while doing construction work in the

Grand Mosque in Mecca, Saudi Arabia, one of the Group's cranes

collapsed due to high winds causing 118 deaths and almost 400 injuries.

As a result, the Saudi king suspended bin Laden’s family construction

firm and banned the firm from taking new projects while having its

current projects reviewed.

39

Chapter 5

Profile of Banks Offering House Loan

Saudi Arabia’s new mortgage law will transform home financing in

Saudi Arabia to property-secured lending from the current practice of

extending loans based on salary assignment, or banks’ automatic

deductions from borrowers’ salaries to repay home loans, says a leading

rating agency.

Saudi banks have also spotted a good opportunity in home

financing as a means to sustain the current lending revival to retail

customers, says a report from Standard & Poor’s titled “How will Saudi

Arabia’s new mortgage law affect domestic banks?“

The agency believes that domestic banks are likely to expand their

mortgage lending activity significantly over time, strengthening their

competitive advantage versus nonfinancial companies and foreign banks

operating in Saudi Arabia.

“We think domestic commercial banks would capture most of the

potential growth in mortgage lending, much as they did when the

regulator reorganized the investment banking sector in 2007. For

instance, Arab National Bank already operates under the

parent/subsidiary model prevalent in the domestic investment banking

sector via its affiliate Saudi Home Loans,” Standard & Poor’s Ratings

Services added. It says the new mortgage law is important for Saudi

Arabia because it will increase individuals’ access to home financing,

“which is positive in our view owing to the country’s widening housing

gap and increasing social needs, given the lack of affordable housing in

the middle-income segment.”

S&P added: “We understand that the government has already

earmarked $ 67 billion to finance this program from the 2011 fiscal

surplus.” It also points out that Saudi banks have traditionally offered

40

home-buying loans, and not mortgages, because home-buying loans are

not fully secured by the properties being acquired but instead primarily

secured by banks’ automatic deduction of loan repayments from

borrowers’ salaries. The report said that conditions for home financing

had changed recently and Saudi banks’ Pillar III disclosures under Basel II

show a clear accelerating pattern in term of residential housing loan

booking. The Real Estate Development Fund’s (REDF) standing as the

largest provider of home financing seems therefore increasingly

contested, it says. According to the Saudi Arabian Monetary Agency

(SAMA), the report said retail real estate financing stood at about 18

percent of consumer financing as of June 30, 2012, versus 8 percent in

2008. In particular, S&P says the newest and smallest banks were very

active in home financing segments as early as 2010, rapidly gaining

market share over traditional players. The REDF, a specialized

government-owned entity — has historically been the primary home-

finance provider. In its September 2011 Article IV publication, the IMF

puts the REDF market share at about 80 percent of outstanding Saudi

home financing in 2011. The IMF further indicates that REDF is

struggling to keep up with demand, resulting in a waiting list well over

15 years, and to monitor the quality of lending, of which it reports half

as delinquent. Saudi authorities, in the run up to the implementation of

new mortgage laws, boosted REDF’s capital by $ 11 billion in March

2011, aiming to increase the availability of housing loans. The

government has also transferred REDF to the Ministry of Housing, which

was upgraded from its former status of General Housing Authority, with

a budget of SR 15 billion, the report pointed out.

According to SAMA, the report said retail real estate financing

stood at about 18 percent of consumer financing as of June 30, 2012,

versus 8 percent in 2008. In particular, the newest and smallest banks

were very active in home financing segments as early as 2010, rapidly

gaining market share over traditional players. S&P added: “We expect

banks to further develop their organizational structures to not only fully

include mortgages, and also the associated insurance products.

Domestic banks have sufficient balance sheet power, in our view, and

already have sufficient physical coverage of Saudi Arabia. This would be

41

difficult to replicate for most privately-held finance companies, and

certainly for the handful nondomestic bank branches allowed to operate

under domestic regulation.

Lastly, domestic banks are already familiar with Shariah-compliant

finance-lease lending as outlined in the new mortgage law package.”

The agency describes SAMA as an effective, thoughtful, and

hands-on regulator. Positively, the Saudi authorities have also planned

for state loan providers resembling Fannie Mae and Freddie Mac in the

US, currently designated as the Saudi Real Estate Refinancing

Corporation, to provide liquidity and stability to the fledgling mortgage

market. We understand this entity will be able to issue mortgage-backed

securities, notably to avoid any funding issues stemming from the

expected strong growth in mortgage lending over the longer term,” said

the report.

It points out that the draft legislation prescribes strict approval

chains, standardized contracts, and mandatory reporting on mortgage

borrowers. We consider these steps as positive developments, especially

because authorities have laid the foundation for the creation of a

centralized database, along the lines of that of the Saudi Credit Bureau,

which in our review has enabled consumer finance to grow according to

its potential,” S&P said. It said the new law also outlines the possibility

for the REDF to work with banks, which could further boost banks’ fee

collection, and enable a larger portion of Saudis to access home

financing.

42

Banks Offering Housing Loans :

SABB :

Home Finance is one of SABB’s Islamic Banking Solutions and is

fully compliant with Shariah principles. Renowned for its benefits and

flexibility, it is considered to be a true pioneer in home ownership

solutions. They offer a range of Home Financing products using:

Ijarah Concept where SABB owns the property and leases it to the

customer with a promise to transfer the ownership in the customer

name at the end.

Istisna’and Ijarah Mausoofa Fi-Dhimmah – SABB provide finance to

customers, who own land, to construct their house as per their taste and

design. A customer can: Own a completed Villa, Duplex, apartment or

Residential building through Ijarah concept.

Own an uncompleted house (near to completion) through Ijarah

concept. Build their own home, if you already own land through Istisna’a

and Ijarah Mausoofa Fi-Dhimah concept. Own a land through Ijarah

concept for building a home in future. Get financing against the property

you already own through Ijarah concept Features & Benefits.

Fully Shariah compliant Products.

Finance available for up to SAR 5,000,000.

Finance available up to 20 years.

Available for Government and Private employees.

Possibility of joint finance for couples & blood relatives (children,

siblings).

Exemption of repayment in case of death or permanent disability.

43

AL-AHLI Bank:

TAYSEER ALAHLI

The 'Tayseer AlAhli' Program is an Islamic product whereby NCB

offers financing to customers for the purchase of commodities (which

are owned by NCB) to be paid back in installments. Investing in Local

Commodities.

NCB selects local commodities (such as rice and barley) that are

traded daily on the Saudi Market. This makes it easy for customers to

resell what they have already bought with a small difference between

the price of purchase from the bank & the price of selling to the market.

FEATURES & BENEFITS

Fulfill Your Dreams

Tayseer AlAhli offers:

Sharia Compliance.

Instant Approval.

Payment programs with easy installments for up to 5 years.

Deferred installments during the holy month of Ramadan.

Insurance in case of death or disability.

Repayment period up to 60 months.

REQUIREMENTS

Customers must be employed by a company allowing NCB salary

transfers through 'SARIE'

Customers must have a monthly salary of at least SR 2000 net (for

Saudis) and at least SR 3000 net (for non-Saudis) .

Customers need to have been employed for at least 1 month (for

Saudis), at least one year (for non-Saudis) and at least 3 months (for

Aramco).

44

Saudi applicants must be between 18-60 years old in order to

apply, please note that applicants may not be over 60 years old as of the

date of their last installment.

Non Saudi applicant must be between 22-60 years old to apply,

please note that applicants may not be over 60 years old as of the date

of their last installment.

Management fees 1% of the amount of financing and not

exceeding SAR 5000

REQUIRED DOCUMENTS & ACTIONS:

Completed Application Form

A copy of your ID card or Iqama

A letter from your employer that includes: job type and date of

employment

A monthly salary certificate and proof of NCB salary transfers

through 'SARIE

1. Application Phase:

Provide the required documents

Specifying the details of the finance (finance amount, tenure, profit

margin, monthly installment)

Sign the application form

Obtain immediate approval

Sign the contract

2. Application execution & Commodity ownership phase:

Firstly you will receive SMS approval

The SMS will contain the name & phone number of the broker

Then you must decide to either sell or collect your commodities

45

3. Call the broker:

Call the broker using the number supplied.

Use your 8 digit NCB account number and your 4 digit pin number

to identify yourself.

Choose one of the following:

Sell the commodity and deposit the proceeds into your account or,

Collect the Commodity directly from the broker

AL-RAJHI Bank :

Personal Finance

We are proud to offer you fully Sharia’a compliant personal

finance in less than 30 minutes! Yes, 30 minutes is all it will take to

provide you with the means to renovate your home, prepare your dream

wedding, ensure your children’s education, or simply deal with those

troublesome and unexpected expenses.

Also, if you wish to get a direct response, please fill this easy online

form and our representatives will get back to you.

Saudi and Non Saudi

Financial illustration as an example only, for your information:

Finance Amount :SR 50,000

Term Cost:3.12%*

Tenure:60 months

Monthly Installment SR 900

Management Fee SR 500

Tadawul Transfer Fee SR 70

46

Tadawul Purchase Fee (0.0012) SR 60

Annual Percentage Rate (APR) 3.68%*

Minimum employment period of 1 month and goes up to 12

months depending on the employer

Salary should be transferred to Al Rajhi Bank

Minimum monthly salary starting from SR 2,000 depending on the

employer

Age should not exceed 60 years when you settle your last

installment (assuming retirement age is 60 years)

Employer must be approved by Al Rajhi Bank

Required Documents

Completed application form for Personal Finance

Valid copy of National ID

Salary Certificate

Salary transfer letter

47

Housing Schemes In Saudi Arabia :

Saudi Arabia's government has 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 programmer 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 - and launched by

the Ministry of Housing last week, aims to break through those

bottlenecks. Saudi families seeking assistance, in the form of state-

subsidized home loans or subsidized 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. Housing minister Shuwaish 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. Khaled al Rubaish, a real estate analyst, said the new scheme

could help to ease the housing problem by creating a clear, universally

applicable mechanism for Saudi families to obtain aid. "The situation will

become clearer for the private sector, real estate developers and

financiers, whether banks or mortgage firms. All of these will now know

their targets," he said. John Sfakianakis, chief investment strategist at

Saudi investment firm MASIC, said: "Any step towards finding a solution

to the housing challenge is good and very much welcome...It turned out

that building 500,000 housing units was more difficult than it seemed, so

we need to pick up the pace." He added that ESKAN would "help initiate

a housing market take-off to tackle the needs of the middle class, where

most of the demand lies. Once people see the supply being addressed,

there will be fewer concerns about systemic risks and housing market

imbalance."

48

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, a high ratio for a wealthy country. Rising rents have made it

difficult for even middle class people to afford housing; many Saudis do

not meet qualifications for housing loans from banks. 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. It may be hard to verify that applications are genuine,

which could delay the handover of homes, said Abdulwahab Abu

Dahesh, a Saudi economist. 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 programmers.

Applicants must not own a house and have not received aid from a

state-subsidized housing programmer 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 favors the most needy

people. Applicants will pay for their subsidized homes or land, or pay off

their loans, in monthly instalments over 10 years through a 25 percent

deduction of their monthly income.

49

Chapter 5

Analysis and Findings

The marital status of the house loan owner:

Bachelor Married

The family members of house loans borrower :

2 members 4 members 6 members 7members

More than 7

38%

62%

Marital Status

Bachelor

Married

19%

24%

24%

19%

14%

The family members of house loans borrower:

2 Members

4 Members

6 Members

7 Members

More than 7

38% 62%

19% 24% 24% 19%

14%

50

Income level of house loans borrower :

SAR 5,000-SAR10,000 SAR 11,000-15,000

SAR 16,000-SAR20,000 SAR 21,000-SAR 25,000

More than SAR 25,000

The occupation of house loan borrower :

Business Govt.emolyed

Private Employed Self Employed other

29%

48%

23%

Income level of house loans borrower

SAR 5,000-10,000

SAR 11,000-15,000

SAR 16,000-20,000

SAR 21,000-25,000

More than 25,000

28%

47%

19%

5%

The occupation of house loan borrower

Business

Govt.employed

Private Employed

Self Employed

Other

29%

0 23%

48%

47% 28%

19%

0

51

Amount of savings of house loan borrower :

SAR 3,000-SAR 5,000 SAR 6,000-SAR8,000

SAR9,000-SAR 11,000 SAR 12,000-14,000

More than SAR 14,000

Sources of information regarding loan facilities available for house loan

borrower :

Newspaper Television Banners Friends

other

62%14%

24%

0 0

Amount of savings of house loan borrower

SAR 3,000-5,000

SAR 6,000-8,000

SAR 9,000-11,000

SAR 12,000-14,000

More than SAR 14,000

47%

43%

0%10%

0%

Sources of information regarding loan facilities available for house loan borrower

Newspaper

Television

Banners

Friends

Other

62% 14%

24% 0

0

47% 43% 0% 10%

0%

52

Are there any pervious borrowings ( loans ) :

Yes No

Key factors influencing house loan borrower in deciding the mode or

model of financing :

Religious Rules Interest Rate Market sentiment

Govt./Pvt. Institution Other

57%

43%

Are there any pervious borrowings ( loans )

Yes

No

33%

43%

0%

24%

0%

Key factors influencing house loan borrower in deciding the mode or model of financing

Religious Rules

Interest Rate

Market sentiment

Govt./Pvt. Institution

Other

57% 43%

33% 43% 0%

24% 0%

53

The present of cost of the affordable house in the market is reasonable

:

Highly Agree Agree Neutral Disagree

Highly Disagree

Loan amount is used for the purpose …….. by the house loan borrower

:

Land Purchase House construction Home

Modification

Personal Use Other

10%

28%

43%

19%

0%

The present of cost of the affordable house in the market is reasonable

Highly Agree

Agree

Neutral

Disagree

Highly Disagree

43%

38%

14%

5% 0%

Loan amount is used for the purpose …….. by the house loan borrower

Land Purchase

House Construction

Home Modification

Personal Use

Other

10%

0%

19% 43% 28%

14%

0% 5%

38% 43%

54

Extremely strict procedures are followed by the banks & financial

institution in-case of home loan default :

Highly Agree Agree Neutral Disagree

Highly Disagree

Overall grading of home loan schemes are beneficial to the loaner :

Highly Agree Agree Neutral Disagree

Highly Disagree

19%

24%47%

0%

10%

Extremely strict procedures are followed by the banks & financial institution in-case of

home loan default

Highly Agree

Agree

Neutral

Disagrre

Highly Disagree

14%

43%

14%

24%

5%

Overall grading of home loan schemes are beneficial to the loaner

Highly Agree

Agree

Neutral

Disagrre

10%

0% 47% 24% 19%

5%

24% 14% 43% 14%

55

The Duration for payment of home loan is keeping the borrowers

happy :

Highly Agree Agree Neutral Disagree

Highly Disagree

The procedures formalities for availing the loan are simple :

Highly Agree Agree Neutral Disagree

Highly Disagree

9%

29%

33%

29%

0%

The Duration for payment of home loan is keeping the borrowers happy

Highly Agree

Agree

Neutral

Disagrre

Highly Disagree

19%

24%

38%

14%

5%

The procedures formalities for availing the loan are simple

Highly Agree

Agree

Neutral

Disagrre

Highly Disagree

9% 29% 33% 29%

0%

19%

5%

24% 38% 14%

56

Time taken for proceduers of loan is very long by Housing finance

institution :

Highly Agree Agree Neutral Disagree

Highly Disagree

Repayment schedule should be in installment of :

Half Yearly Quarterly Monthly Fortnightly

Other

9%

33%

38%

14%

5%

Time taken for proceduers of loan is very long by Housing finance institution

Highly Agree

Agree

Neutral

Disagrre

Highly Disagree

14%

33%33%

6% 14%

Repayment schedule should be in installment of

Half Yearly

Quarterly

Monthly

Fortnightly

Other

5%

14% 38% 33% 9%

14%

6% 33% 33% 14%

57

The existing regulations and government policies encourage availing

and repayment of home loans :

Highly Agree Agree Neutral Disagree

Highly Disagree

Overall approach of the financial institution providing home loans is

stimulating real estate activity :

Highly Agree Agree Neutral Disagree

Highly Disagree

10%

14%

33%24%

19%

The existing regulations and government policies encourage availing and repayment of

home loans

Highly Agree

Agree

Neutral

Disagrre

Highly Disagree

0%

38%

33%

28%

0%

Overall approach of the financial institution providing home loans is stimulating real

estate activity

Highly Agree

Agree

Neutral

Disagrre

19%

33% 24% 14% 10%

0%

28% 33% 38% 0%

58

The present foreclosure measures are not restricting the overall

development of the housing sector :

Highly Agree Agree Neutral Disagree

Highly Disagree

Metropolitan cities like Riyadh , Jeddah and Dammam should be given

more focus house loan disbursement :

Highly Agree Agree Neutral Disagree

Highly Disagree

0%

29%

33%

24%

14%

The present foreclosure measures are not restricting the overall development of the

housing sector

Highly Agree

Agree

Neutral

Disagrre

Highly Disagree

0%

19%

33%29%

19%

Metropolitan cities like Riyadh , Jeddah and Dammam should be given more focus house

loan disbursement

Highly Agree

Agree

Neutral

Disagrre

Highly Disagree

14%

24% 33% 29% 0%

19%

29% 33% 19% 0%

59

The level of pre-requisites for availing a house loan are not difficult :

Highly Agree Agree Neutral Disagree

Highly Disagree

Graduation should be the minimum education level for eligibility for a

house loan borrower :

Highly Agree Agree Neutral Disagree

Highly Disagree

24%

14%

24%

9%

29%

The level of pre-requisites for availing a house loan are not difficult

Highly Agree

Agree

Neutral

Disagrre

Highly Disagree

19%

38%24%

9%

10%

Graduation should be the minimum education level for eligibility for a house loan

borrower

Highly Agree

Agree

Neutral

Disagrre

Highly Disagree

14%

29%

24% 9% 24%

10%

9% 24% 38% 19%

60

Interest based loan is preferred by the house loan borrower :

Highly Agree Agree Neutral Disagree

Highly Disagree

Non interest based loan is preferred by the house loan borrower :

Highly Agree Agree Neutral Disagree

Highly Disagree

14%

29%

38%

19%

0%

Interest based loan is preferred by the house loan borrower

Highly Agree

Agree

Neutral

Disagrre

Highly Disagree

24%

14%

24%

9%

29%

Non interest based loan is preferred by the house loan borrower

Highly Agree

Agree

Neutral

Disagrre

Highly Disagree

0%

19& 38% 29% 14%

29%

9% 24% 14% 24%

61

There are good number of housing finance companies in the market :

Highly Agree Agree Neutral Disagree

Highly Disagree

What is the key factor in deciding about the model of home loan

financing:

Profit Risking Brand Image Number of Customer

Customer Satisfaction Other

19%

14%

34%

19%

14%

There are good number of housing finance companies in the market

Highly Agree

Agree

Neutral

Disagrre

Highly Disagree

19%

14%

29%

24%

14%

What is the key factor in deciding about the model of home loan financing

Profit

Risking Brand Image

Number of Customer

Customer Satisfaction

Other

14%

19% 34% 14% 19%

14% 24%

29% 14% 19%

62

Repayment installment schedule should be :

Half Yearly Quarterly Monthly Fortnight

Other

Regulators and governments policies (streamlining) are helpful in

offering home loans :

Highly Agree Agree Neutral Disagree

Highly Disagree

19%

19%

33%

9%

19%

Repayment installment schedule should be

Half Yearly

Quarterly

Monthly

Fortnighty

Other

19%

33%29%

14%

9%

Regulators and governments policies (streamlining) are helpful in offering home

loans

Highly Agree

Agree

Neutral

Disagrre

Highly Disagree

19%

9% 33% 19% 19%

9%

29% 14% 33% 19%

63

Level of the interest rate charged for home loans is low :

Highly Agree Agree Neutral Disagree

Highly Disagree

The mechanism of housing facilitation system is cumbersome :

Highly Agree Agree Neutral Disagree

Highly Disagree

19%

14%

33%

24%

9%

Level of the interest rate charged for home loans is low

Highly Agree

Agree

Neutral

Disagrre

Highly Disagree

19%

19%

24%

24%

14%

The mechanism of housing facilitation system is cumbersome

Highly Agree

Agree

Neutral

Disagrre

Highly Disagree

9%

24% 33% 14% 19%

14%

24% 24% 19% 19%

64

Strong measure like developed or sell should be taken to developed

the undeveloped land :

Highly Agree Agree Neutral Disagree

Highly Disagree

There is sound and professional planning in financing of housing

projects :

Highly Agree Agree Neutral Disagree

Highly Disagree

9%

14%

24%33%

19%

Strong measure like developed or sell should be taken to developed the undeveloped land

Highly Agree

Agree

Neutral

Disagrre

Highly Disagree

14%

29%

38%

14%

5%

There is sound and professional planning in financing of housing projects

Highly Agree

Agree

Neutral

Disagrre

Highly Disagree

24%

19%

33% 14% 9%

14% 29% 38%

5%

14%

65

The land prices prevailing in the market are good for development of

real estate industry :

Highly Agree Agree Neutral Disagree

Highly Disagree

Housing projects auctioning system follows fair procedures as per loan

borrower :

Highly Agree Agree Neutral Disagree

Highly Disagree

9%

24%

29%

19%

19% Highly Agree

Agree

Neutral

Disagree

Highly Disagree

14%

19%

33%

24%

9%

Housing projects auctioning system follows fair procedures as per loan borrower

Highly Agree

Agree

Neutral

Disagree

Highly Disagree

19%

19% 29% 24% 9%

9%

24% 33% 19% 14%

66

Financing smart cities with good to Waster/Sanitation/Telecom/Energy

infrastructure is:

Highly Agree Agree Neutral Disagree

Highly Disagree

Most of the real estate projects are completed in time :

Highly Agree Agree Neutral Disagree

Highly Disagree

9%

24%

43%

5%19%

Financing smart cities with good to Waster/Sanitation/Telecom/Energy

infrastructure is

Highly Agree

Agree

Neutral

Disagree

Highly Disagree

14%

24%

33%

24%

5%

Most of the real estate projects are completed in time

Highly Agree

Agree

Neutral

Disagree

Highly Disagree

19%

5% 43% 24% 9%

5%

24% 33% 24% 14%

67

The stability and growth of real estate sector is crucial for overall

development of national economy :

Highly Agree Agree Neutral Disagree

Highly Disagree

Expatriate involvement (like in Dubai) is critical for the growth of real

estate sector in KSA :

Highly Agree Agree Neutral Disagree

Highly Disagree

5%

25%

47%

9%

14%

The stability and growth of real estate sector is crucial for overall development of national economy

Highly Agree

Agree

Neutral

Disagree

Highly Disagree

5%

24%

19%

52%

0%

Expatriate involvement (like in Dubai) is critical for the growth of real estate sector in KSA

Highly Agree

Agree

Neutral

Disagree

Highly Disagree

14%

9% 47% 25% 5%

0%

52% 19% 24% 5%

68

Real estate development fund is performing at its best in development

of real estate sector :

Highly Agree Agree Neutral Disagree

Highly Disagree

Starting of real estate sector development index will work as " key

performance indicator " for the sector :

Highly Agree Agree Neutral Disagree

Highly Disagree

14%

19%

33%

24%

9%

Real estate development fund is performing at its best in development of real estate sector

Highly Agree

Agree

Neutral

Disagree

Highly Disagree

19%

14%

33%

19%

14%

Starting of real estate sector development index will work as " key performance indicator " for the sector

Highly Agree

Agree

Neutral

Disagree

Highly Disagree

9%

24% 33% 19% 14%

33%

14%

19% 14% 19%

69

In order for drastic development of real estate sector in KSA the

housing finance model of other countries also need to be taken into

consideration:

Highly Agree Agree Neutral Disagree

Highly Disagree

The resale value of the properties is encouraging for the investors to

invest in the real estate sector :

Highly Agree Agree Neutral Disagree

Highly Disagree

19%

14%

19%

33%

14%

In order for drastic development of real estate sector in KSA the housing finance model of other countries also need to

be taken into consideration

Highly Agree

Agree

Neutral

Disagree

Highly Disagree

24%

19%

24%

19%

14%

The resale value of the properties is encouraging for the investors to invest in the real estate sector

Highly Agree

Agree

Neutral

Disagree

Highly Disagree

14%

33% 19% 14% 19%

14%

19% 24% 19% 24%

70

There is more focus on luxury housing in real estate sector :

Highly Agree Agree Neutral Disagree

Highly Disagree

Public Private Partnership ( PPP ) model would create a good and

successful real estate sector :

Highly Agree Agree Neutral Disagree

Highly Disagree

9%

29%

29%

19%

14%

There is more focus on luxury housing in real estate sector

Highly Agree

Agree

Neutral

Disagree

Highly Disagree

9%

24%

19%

14%

9%

Public Private Partnership ( PPP ) model would create a good and successful real estate sector

Highly Agree

Agree

Neutral

Disagree

Highly Disagree

29%

14%

29% 19% 9%

9%

14% 19% 24% 9%

71

New taxes like transportation tax or fuel tax or additional vechicle tax

implemented in U.S and European countries like France to finance

smart cities would also be a good option in KSA also :

Highly Agree Agree Neutral Disagree

Highly Disagree

Developing 2 tier cities ( Towns into small cities ) would help in the

development of the real estate sector :

Highly Agree Agree Neutral Disagree

Highly Disagree

29%

19%24%

14%

14%

New taxes like transportation tax or fuel tax or additional vechicle tax implemented in U.S and European countries like France to finance smart cities would also be a good

option in KSA also

Highly Agree

Agree

Neutral

Disagree

Highly Disagree

24%

14%

33%

9%

19%

Developing 2 tier cities ( Towns into small cities ) would help in the development of the real estate sector

Highly Agree

Agree

Neutral

Disagree

Highly Disagree

14%

14% 24% 19% 29%

33% 14%

19%

9% 24%

72

Establishment of national housing banks and cooperative societies to --

finance housing is a good initiative :

Highly Agree Agree Neutral Disagree

Highly Disagree

Funding house loans through Islamic mortgage based finance models

will be a welcome step in development of the real estate sector :

Highly Agree Agree Neutral Disagree

Highly Disagree

19%

24%

33%

9%

14%

Establishment of national housing banks and cooperative societies to finance housing is a good initiative

Highly Agree

Agree

Neutral

Disagree

Highly Disagree

14%

29%

24%

19%

14%

Funding house loans through Islamic mortgage based finance models will be a welcome step in development of

the real estate sector

Highly Agree

Agree

Neutral

Disagree

Highly Disagree

14%

9% 33% 24% 19%

14%

19% 24% 29% 14%

73

High growth in FDI in real estate will increase the capacity buildings

unit homes in KSA :

Highly Agree Agree Neutral Disagree

Highly Disagree

14%

33%

24%

19%

9%

High growth in FDI in real estate will increase the capacity buildings unit homes in KSA

Highly Agree

Agree

Neutral

Disagree

Highly Disagree

19%

9%

33% 24% 14%

74

Conclusion

1-As per the analysis the respondents are 38% Bachelor and 62%

Married.

2- As per the analysis the family members of the house loan borrower

4-members – 24%

6- members – 19%

3-As per the analysis income level of house loan borrower , 48% were in

range SAR 11,000-SAR15,000 , were in range SAR 5,000-SAR10,000 is

28%.

4-As per the analysis the occupation of house loan borrower were 48%

in the Govt. Employed ,and 28% in Business section.

5-As per the analysis the amount of savings of house loan borrower ,

62% in range SAR3,000-SAR 5,000 , were in range SAR 9,000- SAR 11,000

is 24% , and in the range SAR 6,000 –SAR 8,000 is 14%.

6-As per the analysis the source of information regarding loan facilities

available for house loan borrower are 47% from the Newspaper , 43%

from the Television , and 10% from the Friends / Relatives.

7-As per the analysis are there any pervious borrowings ( loans ) , 57%

said ( Yes ) , and 43% said ( No ).

75

8-As per the analysis the Key factors influencing house loan borrower in

deciding the mode or model of financing , were 43% in Interest Rate ,

33% in Religious Rule , and 24% in Govt./PVT. Institution.

9-As per the analysis the present of cost of the affordable house in the

market is reasonable are 43% Neutral , and 29% Agree.

10-As per the analysis the Loan amount is used for the purpose …….. by

the house loan are 42.85% for Land Purchase , 38.09% for House

Construction , 14.28% for Home Modification , and 4.76 for Personal

Use.

11-As per the analysis the Extremely strict procedures are followed by

the banks & financial institution in-case of home loan default are 47%

Neutral , and 24% are Agree.

12-As per the analysis the Overall grading of home loan schemes are

beneficial to the loaner are 42.85% Agree , and 23.80% are Disagree.

13- As per the analysis the Duration for payment of home loan is keeping

the borrowers happy are 33.33% Neutral , both agree and disagree have

the same percentage 28.57%.

14-As per the analysis the procedures formalities for availing the loan

are simple are 38.09% Neutral , and 23.8% Agree.

76

15-As per the analysis the time taken for procedures of loan is very long

by Housing finance institution are 38.09% Neutral , and 33.33 Agree.

16-As per the analysis the repayment schedule should be in installment

were 33.33% in Quarterly , 33.33% Monthly , and 14.28% Half Yearly.

17-As per the analysis the existing regulations and government policies

encourage availing and repayment of home loans are 33% Neutral , and

24% Disagree.

18-As per the analysis overall approach of the financial institution

providing home loans is stimulating real estate activity are 38.09%

Agree, 33.33% Neutral , and 23.8% Disagree.

19-As per the analysis the present foreclosure measures are not

restricting the overall development of the housing sector are 33.33%

Neutral , 28.57% Agree , and 23.8% Disagree.

20-As per the analysis Metropolitan cities like Riyadh , Jeddah and

Dammam should be given more focus house loan disbursement are 33%

Neutral ,and 29% Disagree.

21-As per the analysis the level of pre-requisites for availing a house loan

are not difficult are 28% Disagree , 24% are both Neutral and Agree.

22-As per the analysis the graduation should be the minimum education

level for eligibility for a house loan borrower are 38% Agree , 24%

Neutral.

77

23-As per the analysis the interest based loan is preferred by the house

loan borrower are 38% Neutral , 28% Agree , and 19% Disagree.

24-As per the analysis the non interest based loan is preferred by the

house loan borrower having equal percentage 24% for Highly Agree ,

Neutral , and Disagree.

25-As per the analysis there are good number of housing finance

companies in the market are 33%Neutral , and 19% for both Highly

agree and Disagree.

26-As per the analysis the key factor in deciding about the model of

home loan financing are 29% they thought for the Number of customer ,

and 23% they believe it's from the Customer Satisfaction.

27-As per the analysis the Repayment installment schedule they think

should be 33% repay in Monthly basis , and 19% should be in Quarterly

Basis.

28-As per the analysis the regulators and governments policies

(streamlining) are helpful in offering home loans are 33% Agree , 24%

Neutral , and 19% Highly Agree.

29-As per the analysis the level of the interest rate charged for home

loans is low , 33% they see its Neutral , 24% they Disagree , and 19% are

Highly Agree.

78

30-As per the analysis the mechanism of housing facilitation system is

cumbersome , 24% are Neutral , 24% also Disagree , were 19% for both

Highly Agree and Agree.

31-As per the analysis the strong measure like developed or sell should

be taken to developed the undeveloped land are , 33% are Disagree,

were 24% are Neutral.

32-As per the analysis there is sound and professional planning in

financing of housing projects , there are a lot see it as Neutral 38% , and

29% they Agree.

33-As per the analysis the land prices prevailing in the market are good

for development of real estate industry are , 28% Neutral , 24% Agree ,

and 19 % for both Disagree and Highly Disagree.

34-As per the analysis the housing projects auctioning system follows

fair procedures as per loan borrower are 33% Neutral , 24% Disagree ,

and 19% are Agree.

35-As per the analysis the financing smart cities with good to

Waster/Sanitation/Telecom/Energy infrastructure are 43% Neutral , 24%

Agree , and 19% are Highly Disagree.

36-As per the analysis the most of the real estate projects are completed

in time they thinking the 33% are Neutral , 24% are Agree , and also 24%

are Disagree.

79

37-As per the analysis the stability and growth of real estate sector is

crucial for overall development of national economy they thought , 47%

are Neutral , and 24% are Agree.

38-As per the analysis the expatriate involvement (like in Dubai) is

critical for the growth of real estate sector in KSA they believe the 52%

are Disagree , 24% are Agree , and 19% are Neutral.

39-As per the analysis the real estate development fund is performing at

its best in development of real estate sector are 33% Neutral , 24% are

Disagree , and 19% are Agree.

40-As per the analysis the starting of real estate sector development

index will work as " key performance indicator " for the sector are 33%

Neutral , and 19% for both Highly Agree and Disagree.

41-As per the analysis the In order for drastic development of real estate

sector in KSA the housing finance model of other countries also need to

be taken into consideration are 33% they Disagree , 19% are Neutral ,

and 19% they are Agree.

42-As per the analysis the resale value of the properties is encouraging

for the investors to invest in the real estate sector are 24% Neutral , also

24% Highly Agree , and 19% are both Agree and Disagree.

43-As per the analysis there is more focus on luxury housing in real

estate sector , 29% they said its Neutral , also 29% they Agree , and 19 %

they Disagree.

80

44-As per the analysis the public Private Partnership ( PPP ) model would

create a good and successful real estate sector are 43% Neutral , 24%

Agree , and 19% Highly Agree.

45-As per the analysis the new taxes like transportation tax or fuel tax or

additional vehicle tax implemented in U.S and European countries like

France to finance smart cities would also be a good option in KSA also ,

38% they Disagree , 24% are Agree , and 19% Neutral.

46-As per the analysis the Developing 2 tier cities ( Towns into small

cities ) would help in the development of the real estate sector are 28%

they Highly Agree , 24% are Neutral , and 19% they Agree.

47-As per the analysis the establishment of national housing banks and

cooperative societies to --finance housing is a good initiative are 33%

Neutral , 24% they Highly Agree , and 19% Highly Disagree.

48-As per the analysis the funding house loans through Islamic mortgage

based finance models will be a welcome step in development of the real

estate are 33% Neutral , 24% they Agree , and 19% they Highly Agree.

49-As per the analysis the high growth in FDI in real estate will increase

the capacity buildings unit homes in KSA are 33% Agree , 24% are

Neutral , and 19% they Disagree.

81

Appendix

Affordable Housing - KSA Citizens Questionnaire

1. The marital status of house loan borrower:

1 Bachelor 2 Married

2. The family members of house loan borrower:

1. 2 members 2. 4 members 3. 6 members 4. 7 members 5.

More than 7

3. Income level of house loan borrower:

1. SAR 5,000 - SAR10,000 2. SAR 11,000 – 15,000 3. SAR 16,000-

SAR20,000 4. SAR 21,000 - SAR 25,000Ө 5. More than SAR

25,000

4. The occupation of house loan borrower:

1. Business 2. Govt. employed 3. Private Employed 4. Self Employed

5. Other

5. Amount of savings of house loan borrower:

1. SAR 3,000 - SAR 5,000 2. SAR 6,000 – 8,000 3. SAR 9,000 -

SAR 11,000 4. SAR 12,000 - SAR 14,000Ө 5. More than SAR

14,000.

6. Sources of information regarding loan facilities available for house loan

borrower:

1. Newspaper 2. Television 3. Banners 4. Friends/Relatives

5. Others

7. Are there any previous borrowings (loans):

1. Yes 2. No

8. Key factors influencing house loan borrower in deciding the mode or model

of financing:

1. Religious Rules 2. Interest Rate 3. Market Sentiment 4. Govt. /

Pvt. Institutions 5. Other

9. The present cost of the affordable house in the market is reasonable:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

82

10. Loan amount is used for the purpose of ____ by the house loan borrower:

1. Land purchase 2. House Construction 3. Home Modification

4. Personal Use 5. Other

11. Rank most critical difficulties faced by house loan borrower (from 1 most

important) to 5(least important ):

Ө. Tough pre-requisites to qualify for the loan

Ө. Time duration from sanction to getting loan amount

Ө. Lengthy formalities

Ө. Availability of Shariah based house financing model

Ө. Other

12. Extremely strict procedures are followed by the banks & financial institutions

in-case of home loan default:

Highly Agree 2. Agree 3. Neutral 4. Disagree 5. Highly

Disagree

13. Overall grading of home loan schemes are beneficial to the loaner:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

14. The duration for payment of home loan is keeping the borrowers happy:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

15. The Procedural formalities for availing the loan are simple:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree

5. Highly Disagree

16. Time taken for processing of loan is very long by Housing Finance

institutions:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

17. Repayment schedule should be in installments of:

1. Half yearly 2. Quarterly 3. Monthly 4. Fortnightly 5. Other

83

18. The existing regulations and government policies encourage availing and

repayment of home loans:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

19. Overall approach of the financial institutions providing home loans is

stimulating real estate activity:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

20. The present foreclosure measures are not restricting the overall development

of the housing sector:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

21. Metropolitan cities like Riyadh, Jeddah and Dammam should be given more

focus house loan disbursement.

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

22. Suggestions for improving the home loan schemes:

84

Affordable Housing – KSA Real Estate Stakeholder Questionnaire

1. The level of pre-requisites for availing a house loan are not difficult:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

2. Graduation should be the minimum education level for eligibility for a house

loan borrower:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

3. Interest based loan is preferred by the house loan borrower.

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

4. Non interest based loan is preferred by the house loan borrower.

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

5. There are good number of Housing finance companies in the market:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

6. What is the key factor in deciding about the model of home loan financing:

1. Profit 2. Risking brand image 3. Number of Customer 4. Customer

Satisfaction 5. Other

7. Repayment installment schedule should be:

1. Half yearly 2.Quarterly 3. Monthly 4. Fortnight

5. Other

8. Regulators and government policies (streamlining) are helpful in offering of

home loans:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

9. Level of the interest rate charged for home loans is low:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

10. The mechanism of Housing Facilitation System is cumbersome:

85

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

11. Strong measures like develop or sell should be taken to develop the

undeveloped land:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

12. There is sound and professional planning in financing of housing projects:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

13. The land prices prevailing in the market are good for development of real

estate industry:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

14. Housing projects auctioning system follows fair procedures as per loan

borrower:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

15. Financing smart cities with good to Water/Sanitation/Telecom/Energy

infrastructure is possible:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

16. Most of the real estate projects are completed in time:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

17. The stability and growth of real estate sector is crucial for overall

development of national economy:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

18. Expatriate involvement (like in Dubai) is critical for the growth of real estate

sector in KSA:

86

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

19. Real Estate Development Fund is performing at its best in development of

real estate sector:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

20. Starting of real estate sector development index will work as ‘key

performance indicator’ for the sector:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

21. In order for drastic development of real estate sector in KSA the housing

finance models of other countries also need to be taken into consideration:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

22. The resale value of the properties is encouraging for the investors to invest in

the real estate sector:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

23. There is more focus on luxury housing in real estate sector of KSA:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree

5.Highly Disagree

24. Ethics are followed in marketing of real estate sector:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

25. Public Private Partnership (PPP) model would create a good and successful

real estate sector:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

26. New taxes like transport tax or fuel tax or additional vehicle tax implemented

in US and European countries like France to finance smart cities would also

be a good option in KSA also.

87

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

27. Developing 2 tier cities (Towns into small cities) would help in the

development of the real estate sector:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

28. Establishment of national housing banks and cooperative societies to finance

housing is a good initiative:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

29. Funding house loans through Islamic mortgage based finance models will be

a welcome step in development of the real estate sector:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

30. High growth in FDI in real estate sector will increase the capacity building unit

homes in KSA:

1. Highly Agree 2. Agree 3. Neutral 4. Disagree 5.Highly

Disagree

31. Suggestions for improving the home loan schemes:

88

Chapter 8

References

http://www.reuters.com/article/2014/03/13/saudi-housing-

idUSL6N0MA17I20140313

http://www.arabnews.com/kingdom%E2%80%99s-banks-see-good-

opportunity-home-financing

http://www.al-monitor.com/pulse/business/2014/01/saudi-arabia-

housing-policies-failed.html#

http://www.ewaan.sa/en/pressrelease/media-center/press-

releases/saudi-arabian-real-estate-sector-is-all-set-for-exponential-

growth.html

http://www.strategyand.pwc.com/media/file/Beyond-affordability

http://arrow.dit.ie/cgi/viewcontent.cgi?article=1006&context=futuresac

rep

http://www.meed.com/sectors/construction/real-estate/housing-crisis-

looms-in-saudi-arabia/3104147.article

http://alphabeta.argaam.com/article/detail/93639/10-

http://sabq.org/28qfde%E2%80%8E

89

REFERNCES

1-Columnist Youssef Alkwylit , (2003) , "Al-Riyadh" Newspaper , The

housing crisis will blow up many crises in the Kingdom , sabq.org.

2- Jeff Roberts , (2010) , Housing crisis looms in Saudi Arabia ,

http://www.meed.com/

3-Dominic Dudley , (2009) , Saudi Arabia’s Housing Shortage ,

http://www.themiddleeastmagazine.com

4- Sultan Muhanna Al-Muhanna , (2013) , 10 reasons led to the housing

crisis in the Kingdom , alphabeta.argaam.com

5- Abdallah Ben Rubeian , (2014) , Saudi Arabia's housing crisis ,

http://www.al-monitor.com/pulse/business/2014/01/saudi-arabia-

housing-policies-failed.

6- Marwa Rashid ,(2013) , Saudi Arabia launches new housing scheme

to ease shortage , www.reuters.com

7- Carol Fleming , ( 2010 ) , Housing Options in Saudi Arabia ,

http://www.teachsaudi.com

90

8- Oxford Business Group , ( 2007 ) Emerging Saudi Arabia , The Report ,

(8) , pp. 143- 150.

9- United States .Dept. Of Housing and Urban Development , ( 1977 ) ,

Housing and Urban Development In Saudi Arabia , (33) PP. 1968-1979.

10- Brian Edwards , Magda Sibley , Mohammed Hakmi , ( 2006 ) ,

Courtyard Housing: Past, Present and Future. The Role of privacy in the

design of Saudi Arabia Courtyard house , (4) PP. 77-85.

11-Bernheim, B. Douglas and Jonathan Meer. “How Much Value Do Real

Estate Brokers Add? A Case Study.” NBER Working Paper 13796 (2008).

12-Genesove, David and Christopher J. Mayer. “Equity and Time to Sale

in the Real Estate Market ”. American Economic Review 87 (3), 1997,

255-69.

13-Munneke, Henry and Abdullah Yavas. “Incentives and Performance in

Real Estate Brokerage ”.Journal of Real Estate Finance and Economics,

22(1), 2001, 5-21.