To begin with, it is highly unusual for any expats in the Kingdom to buy a place of their own due to the strict laws and regulations. For most expats, their housing is either provided to them by their employer or they are given a housing allowance in order to find their own accommodations. Now shifting to Saudi nationals, a large percentage of Saudi nationals do not own their homes. Those who do own have either inherited the property through the family or are among those in the upper echelons and can afford to buy a home. Many average Saudi citizens who work hard for a living, manage to put away some savings, continue to rent a villa or an apartment. One of the reasons for this is that mortgages such as we are familiar with in the West are not yet readily available here in the Kingdom. Many Saudis who are buying or building pay with cash. It is not unusual to see partially completed houses as building is only constructed when cash is available. I’m not an expert on fully understanding why mortgage plans are not being offered in the Kingdom. When I have asked about this, I’m told it is because of the relatively young age of the Kingdom; the Islamic banking system; and lastly, reluctance on the part of investors and banks to provide mortgage programs. As a result so many Saudi nationals continue to rent and many rent for years and years with little likelihood or plans of ever owning their own home. I spoke to one Saudi individual who had a background in finance and had worked in the banking industry for years. One of his comments surprised me. We were discussing the issue of mortgages and he said even before looking at getting a mortgage, one should also explore the difficulties for a Saudi national to get a loan in general. According to this gentleman, a major bank’s requirement for consideration of a loan is that the applicant could not even apply for a loan until he had worked at the same employer for five years. If not, the application would be automatically disqualified. The good news is that economic reform and changes to the banking system is underway here in the Kingdom. The Saudi government is well aware of the need for changes in banking and finance. Until then, it is very much a cash and carry environment.
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