The best Islamic Finance principle to base the much-awaited Saudi mortgage law should be sukuk-based with a Shariah-compliant set of guidelines, Giambattista Atzeni, vice president and MENA business manager for corporate trust and a member of the steering committee of the Gulf Bond and Sukuk Association at BNY Mellon Corporate Trust in Dubai told Arab News.
The best Islamic Finance principle to base the much-awaited Saudi mortgage law should be sukuk-based with a Shariah-compliant set of guidelines, Giambattista Atzeni, vice president and MENA business manager for corporate trust and a member of the steering committee of the Gulf Bond and Sukuk Association at BNY Mellon Corporate Trust in Dubai told Arab News.
Proving the overall success of the sukuk market in Saudi Arabia and the region, Atzeni said that The Middle East Sukuk market was certainly the most active. "We expect that activity will increase in Q1 2011 when many projects will be refinanced due to the maturity of Sukuk bond transactions next year," he said.
He also commented that with the Saudi mortgage market and a new law becoming active soon a further increase would be brought to the sukuk market due to Shariah-compliant home loans, but before this can happen the real estate market must do its part as land prices must drop, Atzeni stated.
"Land prices must come down to a decent price. If land is expensive and project developers want to build an apartment or housing project, those expenses will have to be incorporated into the cost of the purchase price of the apartment or home. Also we do not want to create a housing bubble. In the past many were just buying land and after a few months selling it at profit. The value has not increased in terms of real value, but only monetary value," the vice president said.
A shortage of housing and rising land costs, according to a report released this month by CB Ellis states that the prices of housing are rising. "The sheer pressure of population growth and increase in construction costs and shortfall of development are likely to force housing prices higher," the report stated.
The report also confirmed in Jeddah alone there is a shortage of 300,000 dwellings.
Atzeni believes that because of the desperate need for affordable housing in the Kingdom where most people can still not afford to purchase property or a home will change for the better following the adoption of the mortgage law.
He also said that it is very important however that proper guidelines were followed construct affordable properties. "For example, King Abdullah Economic City is a wonderful infrastructure project but not everyone can afford to live luxuriously. We need affordable housing elements to satisfy the demand of the mortgage market in order for it to be helpful in allowing those who can't afford a big down payment to have either the bank or a government office guarantee," he said.
He added that the Saudi government has been keen in offering this assistance if one proves to pay in a prompt manner for five years with privileges given to the home buyer. Other positive effects will be that the mortgage law is expected to put the Kingdom's economy into an even more positive cycle.
Currently the debate on when the law will finally be introduced has been shelved until after the holy month of Ramadan.
In a previous interview with Arab News, Muhammed Al-Ghamdi, secretary-general of the Shoura Council has said that some of its members needed more time to discuss the proposed mortgage law concerning the country's economy and this is why it has been delayed.
Source: www.globalislamicfinancemagazine.com
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