A framework for providing lifelong finance to the owners of affordable dwellings in the Kingdom of Saudi Arabia

Globally, there has been a substantial increase in the number of people who are not able to buy their own dwellings due to the phenomenal appreciation of real estate prices. In line with this trend, a large proportion of the population in the KSA (Kingdom of Saudi Arabia) also appears to have had neither the chance to own their chosen property nor benefit from the real estate appreciation. It seems that this situation has arisen because the financial system does not correspond to the non-traditional characteristics of their clientele.The cultural and religious heritage and the personal attitude towards borrowing are distinctly different in the KSA. These characteristics, which are explored in detail in this paper, affect how a client would engage with a financial institution in acquiring a loan/mortgage. Furthermore, the client’s lifelong needs – such as upgrading the dwelling – are not addressed by the conventional loan system. This paper proposes a framework for lifelong (ongoing) financing to address these issues. This framework was tested through a pilot study to assess the current state – and the attitude – of the banks and the Real Estate Development Fund (REDF) with regards to such a lifelong support framework.

Research highlights
► Banks are willing to help their clientele with problems arising from certain environmental impacts.
► Banks have a number of legal constraints that include the present Saudi laws.
► Rigidities in the KSA’s restrictive banking practices limit their financial flexibility.
► Banks should consider the financial constraints, calculate the risk and advise the owner accordingly.
► Banks should assess the degree of lifelong impact of a certain change to the property.