It has been reported that the Saudi Arabian Shoura Council, the Kingdom's consultative body, has approved an amendment to the Saudi real estate legislation to allow non- Saudis to acquire real estate in Saudi Arabia and amendments to the draft mortgage law. These legislative moves are designed to help meet the demand for significant number of new houses in Saudi Arabia, and encourage greater bank lending.
Presently, it is theoretically possible to grant security over real estate in Saudi Arabia by way of a pledge. However, on the presumption that lending from commercial institutions will involve provisions for interest (as prohibited by Islamic principles), notaries in Saudi Arabia have historically refused to notarise such real estate mortgages. Banks have side stepped this restriction with Islamic financing on commercial properties. However, no such alternatives exist for individuals in a residential context.
The proposed new mortgage law has been almost a decade in the making and it is uncertain when the law will be implemented. The new mortgage law will provide a framework for the mortgaging and financing of real estate. It is expected that the law will consist of five parts, introducing:
- a mortgage registration law;
- a real estate funding law;
- a finance companies control law;
- a financial leasing law; and
- an execution and enforcement law.