Controls for Banks and Real Estate Finance Companies Owning Real Estate Located within the Cities of Makkah and AL-Madinah
No: 598900000099 Date(g): 2/1/2019 | Date(h): 25/4/1440 Status: In-Force Translated Document
Based on the powers granted to SAMA under the Banking Control Law issued by Royal Decree No. (M/5) dated 22/2/1386H, the Real Estate Finance Law issued by Royal Decree No. (M/50) dated 13/8/1433H, and the Finance Companies Control Law issued by Royal Decree No. (M/51) dated 13/8/1433H, and in implementation of the Council of Ministers’ Decision No. (494) dated 14/9/1439H, which approved the amendment of Article (5) of the Law of Real Estate Ownership and Investment by Non-Saudis, where paragraph (1/c/2) of the same article includes "Banks and real estate financing companies licensed by the Central Bank are exempt from the restriction placed on non-Saudis from owning real estate in the cities of Mecca and Medina, in accordance with regulations set by the Central Bank. However, this exemption is limited to the ownership of real estate for the purpose of financing it for individuals holding Saudi nationality, as well as properties designated for their headquarters or branches, or those required for conducting their activities."
Attached is a copy of the Controls for Banks and Real Estate Finance Companies Owning Real Estate Located within the Cities of Makkah and AL-Madinah. SAMA emphasizes that banks and real estate financing companies must immediately take the necessary actions to ensure full compliance with these regulations.
Introduction
These controls apply to banks and real estate financing companies operating in the Kingdom when owning properties located in the areas of Makkah and AL-Madinah. SAMA is considered the supervisory authority authorized to implement these controls and take necessary actions as deemed appropriate regarding any violations of these controls, including imposing penalties in accordance with the applicable provisions of the Banking Control Law issued by Royal Decree No. (M/5) dated 22/2/1386H, Implementation Rules for Banking Control Law issued by Ministerial Resolution No. (3/2149) dated 14/10/1406H, the Real Estate Finance Law issued by Royal Decree No. (M/50) dated 13/8/1433H, the Finance Companies Control Law issued by Royal Decree No. (M/51) dated 13/8/1433H, and it's implementing regulation issued by the the Governor of Saudi Central Bank Resolution No. (2/MFC), dated 14/04/1434H, the Law of Real Estate Ownership and Investment by Non-Saudis issued by Royal Decree No.(M/15), dated 17/04/1421H, and the Council of Ministers’ Decision No. (494) dated 14/9/1439H, which approved the amendment of Article (5) of the Law of Real Estate Ownership and Investment by Non-Saudis.
Chapter One: Definitions
The following words and phrases, wherever mentioned in these controls, shall have the meanings set forth opposite each, unless the context indicates otherwise.
Controls: Controls for Banks and Real Estate Finance Companies Owning Real Estate Located within the Cities of Makkah and AL-Madinah.
Central Bank: The Saudi Central Bank*.
Banks: Banks operating in the Kingdom.
Real Estate Finance Companies: Joint-stock companies licensed to practice real estate financing activities.
Non-Saudi: A natural person who does not hold Saudi citizenship, or a non-Saudi company, or a Saudi company founded or participated in by a natural or legal person who does not hold Saudi citizenship.
* The "Saudi Arabian Monetary Agency" was replaced By the "Saudi Central Bank" in accordance with The Saudi Central Bank Law No. (M/36), dated 11/04/1442H, corresponding to 26/11/2020G.
Chapter Two: General Provisions
2- Without prejudice to related regulations, banks and real estate finance companies may own properties located in the cities of Mecca and Medina for the purpose of financing them to beneficiaries, or such ownership may be specific to their headquarters, branch offices, or necessary for their operations.
3- Without prejudice to the provisions of the Law of Real Estate Ownership and Investment by Non-Saudis, the financing referred to in paragraph (2) of these controls is limited to natural or legal persons holding Saudi nationality only, in accordance with the applicable regulations set forth by the relevant authorities.
4- Banks and real estate finance companies are prohibited from selling -properties they own in the cities of Makkah and AL-Madinah for the purpose of using them as (branches or employee housing)- to non-Saudis.
5- Banks and real estate finance companies are prohibited from selling -Regarding properties that are transferred to their ownership in the cities of Makkah and AL-Madinah due to customer defaults on payments or customers’ unwillingness to own the property at the end of the lease term in cases where the real estate financing contract is structured as a lease (Ejarah)-, to non-Saudis .
6- Banks and real estate finance companies must conduct due diligence to ensure that the actual beneficiary of the real estate financing in the cities of Makkah and AL-Madinah holds Saudi nationality concerning properties owned by the bank or real estate finance company related to active financing contracts.
7- Banks and real estate finance companies must limit real estate financing contracts for individuals to the Mortgage Finance Model Contracts according to what is issued by SAMA in this regard.
8- Banks and real estate finance companies must notify SAMA well in advance before acquiring or selling properties located in the cities of Makkah and AL-Madinah, and provide sufficient information about the property and the buyer.
9- Banks and real estate finance companies must provide SAMA with quarterly reports that include cases of (ownership/sale/transfer) of properties located in the cities of Makkah and AL-Madinah.
Chapter Three: Final Provisions
10- Banks and real estate finance companies must implement what is stated in these controls, in addition to complying with all relevant laws, regulations, rules, and instructions issued by the relevant authorities.
11- Banks and real estate finance companies must adhere to the mandatory instructions when providing real estate finance products to individuals as issued in Circular No. 46544/99 dated 02/09/1439H.
12- Banks and real estate finance companies must comply with SAMA Circular No. 381000074831 dated 14/07/1438H regarding the Definition of Commercial Mortgage.
Chapter Four: Enforcement
13- These controls shall take effect from the date of their issuance.