Real estate developer Abdullatif Al Shelash says Saudi Arabia is in a growth pattern, especially when it comes to real estate, and mortgages are a big reason behind the residential rush.
As a board member of Saudi Home Loans, he says it means a lot to him to be able to have a positive impact on the lives of the Saudi people. Saudi Home Loans has been the catalyst for securing mortgages for many first-time homeowners in Saudi Arabia. “I was one of the first people there who actually started the draft of the laws for mortgage laws in Saudi,” Abdullatif Al Shelash says.
The industry leader does his research. Abdullatif was involved in several comparative studies between the mortgage industries in Europe, the United States, and Asia, and how it could apply to loans in Saudi Arabia. It ultimately led to convincing the Ministry of Finance that there was a need for mortgages in the Kingdom.
“When the Ministry of Finance gets convinced that there needs to be a mortgage industry in Saudi, then SAMA — which is [now] the [Saudi] Central Bank — gets convinced. Then when SAMA gets convinced, the Royal Court gets convinced, the Shura Council gets convinced, the whole country will start lobbying with them,” Abdullatif Al Shelash says. “And then they said, ‘OK, let’s mandate to really try the first mortgage laws. Then there was a hope for the mortgage laws to come out in 2008. Then the subprime [crisis] happened globally. We all know about it.”
Sheikh Abdullatif Al Shelash says it left many regulators in Saudi debating, “What is a mortgage?”
He notes that the effects of the subprime global financial crisis in 2008 delayed the mortgage industry for four years; it was finally approved in Saudi Arabia in 2012.
Saudi Home Loans Impact on Saudi Arabia’s Housing Market Is Undeniable
Before Al Shelash’s financial innovation, the majority of Saudi residents were renting. Just 22% were official homeowners when Saudi Home Loans launched. Al Shelash adds that figure has soared since then, with roughly 60% of Saudis owning homes since 2020.
“I think the mortgage laws have developed the market,” he says. “Previously, most Saudi people tended to think that buying a house and taking a mortgage of 20 years is a big burden. Saudi Home Loans and also the drop of interest rate in the last 10 years, I think, have allowed mortgage companies and Saudi Home Loans to really penetrate the markets and also promote the mortgage industry in a much, much better way.”
Al Shelash says he and his team were taking the mortgage laws from one government hall to another, essentially acting as lobbyists for the mortgage movement to really go full throttle. “Our consumers need 10 choices of mortgages, not only one choice of mortgages,” Abdullatif Al Shelash insists. “So the more you raise the affordability for your consumer, the more buildings you could build — the more opportunity [for] you [to] could flourish in your business.
“Saudi Home Loans was the one that first ignited the industry, [to] have started giving out mortgages even before the mortgage laws had full effect and full approval,” he says. “[It’s] one of the first companies that actually have received the license from the Central Bank in Saudi to really do that. And it’s been really leading the market and doing innovative products and also serving its customers and all of that. But it helped in the beginning in encouraging investors that yes, the mortgage business is a viable business, feasible in Saudi.”
Mortgages in Saudi Arabia Still in Infancy, According to Abdullatif Al Shelash
Despite the momentum Saudi Home Loans has made, Abdullatif Al Shelash says the mortgage market in Saudi Arabia is still in its infancy.
“You go to any major city globally and you will find the percentage of mortgages will reach to 80%, 85%. Meanwhile, in Saudi, I don’t think that it has reached more than 5% and 10%. I haven’t looked at the last statistic coming out of [Saudi Arabian Monetary Authority] on mortgage penetration, but there is a tremendous opportunity for a hundred companies like Saudi Home Loans.”
Historically, housing depreciation in Saudi is one of the biggest obstacles Al Shelash says his industry has had to face.
“House depreciation in Saudi, when we started it as a case, when we were doing the mortgage industry or setting out the laws for that, was due to poor construction and also no standardization,” Abdullatif Al Shelash explains. “So for every home in Saudi during that time being constructed, you can not really determine how the house was being built; what was the standard? The windows are different dimensions, because every house is being built according to individual needs. There is no big developer.”
Al Shelash compares the situation to buying a property in Dubai, United Arab Emirates.
“If you want to buy a property in Dubai, you go, ‘OK, there is the Emaar Properties, there is Damac Properties, there is this other developer of property,” he says. “This is the name of the development, these are the specifications for the three apartments, these are the specifications for the two apartments. Here in Saudi, you would not have those specifications. You will go to one street and you will find a house being built in one way, and you find another house we built in a totally different way.”
Another challenge Abdullatif Al Shelash says is currently facing Saudi’s loan market involves the securitization market.
“[It’s] where a mortgage company will take 500 loans, 1,000 loans, bundle them into a security and offer them to an investor to buy it,” he says. “Securitize them and take a servicing fee, take a premium, and start getting more cash to really go and provide mortgages to others, which is the cycle globally.”
Al Shelash further emphasizes that in addition to higher mortgage demand in Saudi Arabia, the real estate market in general is becoming a prime priority.
“Right now, [the] real estate sector has been the second biggest sector after oil petrochemicals in Saudi,” Abdullatif Al Shelash says. “And I think that’s one of the major trends that we’ve seen.”