Slow Pace of Repayments, a major concern
The Real Estate Development Fund (REDF), a specialized credit institution, set up by the government, provides interest-free housing loans to Saudi citizens. REDF has so far provided loans to the tune of SR 125 billion between 1974 and 2003, according to Eng Salah A. Abdulkarim, Assistant Manager, Eastern Province Branch of the Fund. A large part of these loans -about SR 120 billion-is accounted for by private housing and the balance by the property developers.
The number of loans approved by the Fund during the period reached 450,500. Eng A. Abdulkarim expressed the hope that the recent announcement of an additional SR 9 billion for the REDF by HRH Crown Prince Abdullah Bin Abdulaziz, Deputy Premier and Commander of the National Guard, would give a big boost to the lending capability of the Fund.
A total of 552,616 private houses have been built by the REDF loans since its inception in 1974. Besides, loans provided for investment purposes have helped build another 29,390 houses, 5159 commercial complexes and 2,857 buildings for offices. People from almost all parts of the Kingdom have benefited from the REDF loans which were allocated in 3,814 cities, towns and localities.
Slow Loan Recovery
Eng A. Abdulkarim in an interview with SAUDI COMMERCE and Economic Review pointed out that repayment of REDF loans is very slow which has delayed the allocation of new loans. He disclosed that due to sluggishness in the recovery of loans, more than 18,000 applicants have been waiting for fund in the Eastern region alone (except Al- Hasa and Hafr Al-Baten).
He said that a number of effective measures have already been undertaken to accelerate the rate of loan recovery. For instance, a 25-member vigilant team has been formed for the Eastern Province to follow-up with the defaulters. A new provision has also been introduced to deduct monthly installment from the salary of borrowers. Another important measure adopted is that houses built by REDF loans cannot be rented out without the permission of REDF if its loans are not paid in time.
Private loans: Private loans are payable in installments over a period of 25 years. This loan covers up to 70 percent of the total cost of construction. The amount of loan allocated in this category is between SR 200,000 and SR300,000.
Saudi nationals above 21 years old are eligible for these loans. An 18-year old can also get loan provided he is married. Orphans below 18 years, widows, divorcees, spinsters and women above 40 years old could be beneficiaries of this type of loans.
There are a number of exemptions if loans are paid in time, said Eng A. Abdulkarim. One exemption is that 20 percent of the value of each installment is written off when loans are paid in due time. In addition, an exemption of 30 percent is given if loans are settled in one installment.
Investment loans: This type of loan is medium-term given to Saudi investors to build residential, office and commercial compounds and showrooms. REDF investment loans cover up to 50 percent of the total value of a project or a maximum of SR 10 million.
Apart from providing loans, REDF has distributed 21,211 housing units, including 14,686 apartments and 9,854 villas in 13 housing projects built by the government throughout the country. They comprise multi-storey buildings and single-storey villas. These REDF-maintained projects have attractive facilities like children's playgrounds, gardens and other utility services.
In the Eastern Province, REDF has distributed 5,770 apartments and 1,500 villas in five housing projects located in Dammam, Al Khobar, Al Ahsa and Qatif.
The largest project in the region is Al Khobar Housing located in the southern part of Al Khobar city beside the road leading to the Al Aziziah shore. It is a 1,282,000 square meters housing project consisting of 219 buildings of different height ranging from 4 to 8 storeys. It has a total of 4,106 apartments with each one covering 197 square meters.
© Saudi Commerce and Economic Review 2004
