In recent years, the Kingdom of Saudi Arabia has made several attempts to provide affordable real estate financing opportunities, particularly in the residential sector. The introduction of the Real Estate Mortgage Law in 2012 had been anticipated to create a paradigm shift in residential financing.
Prior to the Mortgage Law, local banks took an outright transfer of title to the real estate or to the nominee named by the banks for the duration of the financing, and the transfer of title structure involved the borrower transferring legal title to a special purpose company, set up by the bank providing the financing. The Mortgage Law paved the way for a traditional mortgage structure, whereby the title to the property would remain with the borrower and the bank would obtain a registered mortgage.
However, issues continued in the actual application of that law, particularly at the point of registration of the sale at the notary public, and in 2017, the Saudi Arabian Monetary Authority (“SAMA”) issued a circular directing banks and finance companies to perfect their real estate security under the Mortgage Law. In particular, the SAMA circular urged banks and finance companies to:
Some of the key features of the Mortgage Law are as follows: