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  • Real Estate Finance

    • The Rules Governing Real Estate Refinance Companies

      To read The "Rules Governing Real Estate Refinance Companies", click here.

    • Guidelines for the 'Self-Build' Real Estate Financing Product Granted to Individuals

      Based on the powers vested to SAMA under the relevant regulations, laws, and instructions, and in light of SAMA's role in protecting the rights of clients of financial institutions under its supervision, and with a view to ensuring the safety of the real estate financing sector and achieving financial stability, real estate financiers must adhere to the following when granting financing under the 'Self-Building' product for real estate financing:

      1. Determine the total value of construction payments "financing amount" at the start of the contract, and link the payments to specific completion percentages in a single financing contract.
      2. Reflect the total financing amount in the client’s credit record at the start of the contract, specifying the actual amount granted to the client in the same record.
      3. Ensure that administrative fees charged by the financing entity to the beneficiary do not exceed (1%) of the financing amount or SAR 5,000 (whichever is lower), in accordance with the instructions issued by SAMA, including those communicated under Circular No. 361000091211 dated 30/06/1436H.
      4. Disburse the specified payment amount within (15) days from the date of the client's request, provided that the client has met the completion percentages required for each payment as per the contract.

      Please take note and implement these provisions within a period not exceeding (30) days from the date of this notice. Additionally, real estate financiers must take all necessary steps to apply the provisions of this circular to existing financing contracts under the 'Self-Building' real estate financing product.

    • Instructions When Offering Real Estate Finance Products for Individuals

      To read the “Instructions When Offering Real Estate Finance Products for Individuals”, click here.

    • Real Estate Murabaha Finance Buyout

      Based on the powers vested to SAMA in accordance with the relevant regulations, rules, and instructions, and with reference to the instructions regarding the time periods for issuing the release letter and transferring the account and debt, issued in accordance with Circular of SAMA No. (43023350) dated 15/3/1443 H, to SAMA Circular No. (42013215) dated 4/3/1442 H, Regarding the subjection of the mortgage contract made between a lender - on behalf of or as an agent for others - and individual customers is subject to the financing regulations and instructions issued by SAMA.

      1. SAMA wishes to emphasize the following to mortgage lenders:
        A- Executing customer requests related to the transfer of mortgage financing debts according to the Murabaha agreement, while adhering to the specified time frames for transferring mortgage financing debts as outlined in the instructions mentioned above.
      2. B- Compliance with SAMA's instructions related to the purchase and transfer of mortgage financing debt between financiers.
      3. C. The working days related to the procedures for lifting the mortgage are excluded from the time periods mentioned in the instructions above, provided that the reason is related to an external party.
      4. D- Update internal policies in accordance with these instructions.
         
      5. For your information and action as of its date.

      6.  

    • Responsibilities of the Head of the Contracts Register and the Registrars

      No: 588400000099 Date(g): 29/9/2019 | Date(h): 30/1/1441Status: In-Force

      Translated Document

      Reference to the letter of His Excellency the Governor No. 81/M SH T, dated 09/01/1441H, which includes the approval of the powers of the head of the Contracts Register and the registrars based on the powers granted to him by the Finance Lease Law, issued by Royal Decree No. M/48, dated 13/08/1433H, and it's Implementing Regulation issued by the decision of His Excellency the Governor No. 1/M SH T, dated 14/04/1434H, and in accordance with Paragraph (4) of Article Fifteen of the Implementing Regulation of the Finance Lease Law, Which states that "SAMA shall issue a resolution determining the powers of the head of the Contracts Register and the registrars".

      Please find the decision regarding the powers of the head of the Contracts Register and the registrars for compliance and implementation.

      This decision is issued pursuant to the Finance Lease Law, issued by Royal Decree No. M/48, dated 13/08/1433H, and it's Implementing Regulation issued by the decision of His Excellency the Governor No. 1/M SH T, dated 14/04/1434H, and in accordance with Paragraph (4) of Article Fifteen of the Implementing Regulation of the Finance Lease Law, Which states that "SAMA shall issue a resolution determining the powers of the head of the Contracts Register and the registrars".

      • Article One: General Provisions

        1. Without prejudice to the provisions of Article Sixteen of the Implementing Regulation of the Finance Lease Law, the appointment of the head of the Contracts Register and the registrars shall be made after obtaining a letter of no objection from SAMA.
           
        2.  The head of the Contracts Register and the registrars are directly linked to the Chief Executive Officer of the Contracts Registration Company or their designee.
           
        3.  SAMA has the authority to remove the head of the Contracts Register and the registrars from their positions by a reasoned decision in the event of failure to fulfill their statutory or professional duties.
           
        4.  If the registrar of the Contract Register refuses to draft or authenticate any document, the concerned parties have the right to appeal this decision to the company and then to the Central Bank. If the appeal is rejected, they are entitled to take the matter to the competent court.

      • Article Two: Powers of the Head of the Contracts Register and the Registrars

        1. The Head of the Contracts Register is responsible for the registration activities in the registry. They receive entries and any amendments thereto, refer them to one of the contract registrar of the Contracts Registry, and carry out the registration in accordance with the Finance Lease Law, its Implementing Regulation, and this decision.
           
        2.   The head of the Contracts Register and the registrars, each within their area of power, are responsible for the accuracy and correctness of the registration of all financial leasing contracts and the content of the data and documents submitted, unless the error is due to an external party. The affected party has the right to appeal to the relevant authorities if it is proven that they have failed to verify the accuracy of the data or to register it in accordance with the prescribed procedures.
           
        3.  The Head of the Contract Register shall be directly responsible for the records and registers for a minimum period of ten years from the date of the expiration of the obligations arising from the contract.
           
        4. The registrar is provided with an official seal to stamp the transactions they handle. Electronic means may also be used for this purpose, as deemed appropriate.

         

      • Article Three: Obligations of the Head of the Contracts Register and the Registrars

        The head of the Contracts Register and the registrars must adhere to the following obligations:

        1. They are to perform their duties at their place of work, and they may also carry out their duties at the lessor's premises, with the lessor bearing the associated costs.
           
        2. Verify the identity of the contracting parties or their representatives based on official documents issued by the competent authority for identity verification.
           
        3. Verify the eligibility of the contracting parties or their representatives, and their qualifications to enter into contracts.
           
        4. Verify the accuracy of the documents and decisions issued in the Arabic language, and it is permissible to authenticate those issued in a foreign language after being translated into Arabic by an approved translator. The authentication should be done by both the original and translated versions together.
           
        5. Hold all contract registers necessary to record transactions and classify them according to what is determined by SAMA.
           
        6. The preservation and organization of the records in the Contracts Register must be in a secured location to protect them from any tampering or factors that may affect their integrity, and this should be done in designated areas.
           
        7. Stamping the document of ownership of the asset and the contract with the registration number, or taking the necessary measures regarding documents that cannot be stamped, such as real estate ownership deeds, the use of electronic means for the authentication of documents is permitted.
           
        8. Adhere to the Finance Lease Law and its Implementing Regulations, and to any instructions issued by SAMA or the relevant authorities in this matter.

         

      • Article Four: Enforcement

        This decision is effective from the date of its issuance.

    • Procedural Requirements for Mortgage Registration

      To read the “Procedural Requirements for Mortgage Registration”, click here.

    • Controls for Banks and Real Estate Finance companies Owning Real Estate Located within the Cities of Makkah and AL-Madinah

      To read the “Controls for Banks and Real Estate Finance companies Owning Real Estate located within the Cities of Makkah and AL-Madinah”, click here.

    • The Working Mechanism of Dealing with the Beneficiaries of First Home Regarding Tax Revenues

      To read The Working Mechanism of Dealing with the Beneficiaries of First Home Regarding Tax Revenues, click here.

    • Variable-Cost Real Estate Financing Products for Individuals

      SAMA would like to emphasize the importance of the Financial Consumer Protection Principles and Rules , particularly the necessity of Equitable and Fair Treatment (Principle No. 1), disclosure and transparency (Principle No. 2), and financial education and awareness (Principle No. 3). Additionally, SAMA highlights the responsibilities of lender toward their clients, particularly the obligation to ensure that the product is suitable for the client's needs and circumstances, explaining the product’s nature, costs, and associated benefits and risks in a clear and understandable manner. Moreover, lender must provide advice and support to clients facing financial difficulties, working with them to overcome these challenges before proceeding with legal actions.

      In light of the challenges some beneficiaries of variable-cost real estate financing products have faced, particularly the increase in monthly installments, and based on a study conducted in this regard, SAMA directs real estate lenders to immediately take all necessary actions to care for their clients. These care measures should include appointing specialists with sufficient knowledge of this type of product to communicate with clients, providing a clear explanation of the product’s nature, its benefits and risks, the relevant contract terms, the repricing mechanism, and addressing any other client inquiries. The due diligence procedures must also include offering clients one or more options, in addition to the option of continuing with the existing real estate financing contract. These options may include converting the contract to a fixed-rate financing contract, rescheduling the payments, or enabling the client to transfer the debt to another real estate lender under conditions that suit the client.

      SAMA stresses that none of these options should result in the client being charged any additional costs for the remaining period, in accordance with the Guide for Calculating the Early Payment Amount outlined in the finance regulations and without imposing any additional administrative fees on the client.

      SAMA clarifies that these directives are issued to ensure the protection of clients' rights and to promote fairness and transparency in transactions. This is based on the powers granted to SAMA under the Saudi Arabian Monetary Authority Law, issued by Royal Decree No. (23) dated 23/05/1377H, the Real Estate Finance Law issued by Royal Decree No. (M/50) dated 13/08/1433H, the Finance Lease Law issued by Royal Decree No. (M/48) dated 13/08/1433H, and the Finance Companies Control Law issued by Royal Decree No. (M/51) dated 13/08/1433H, along with the implementing regulations for these laws. SAMA will take legal action in the event of non-compliance with the above directives.

      Additional instructions pursuant to Circular No. (391000018728) dated 17/2/1439H.

      In light of the inquiries received by SAMA on this matter, SAMA emphasizes that real estate lenders must undertake the following:

      1. Disclose the reference index for the variable cost of real estate financing products on their website.
      2. Urgently communicate with all customers benefiting from variable-cost real estate financing products regarding the following points:
       A. The ability to access the reference index data for the variable cost of real estate financing products on the lender’s website and provide the dedicated link for this information.
       B. Provide customers with contact details and grant them a period of no less than one month from the date of receipt to offer them options to amend their contract terms or any other options as outlined in the aforementioned circular.
       C.Inform customers of their right to communicate with a credit advisor who is well-versed in the characteristics of this type of product to provide a clear explanation of the product’s nature, its benefits and risks, the relevant contract terms, the repricing mechanism, and to answer any customer inquiries in this regard. This communication and the outcomes must be properly documented.

      Please note that SAMA will take all necessary legal actions in the event of non-compliance with the issued instructions in this regard.

    • Transfer of The Real Estate Financing Debts

      Based on Article 2 of the Real Estate Finance Law issued by Royal Decree No. (M/50) dated 13/08/1433H. which authorizes SAMA to regulate the real estate finance sector, including the issuance of standards and procedures related to real estate financing, further to the circular No. 391000000353 dated 01/01/1439H. Regarding Variable-Cost Real Estate Financing Products for Individuals.

      Based on the role of SAMA in protecting the rights of customers of financial institutions under its supervision, and due to the importance of regulating the transfer of customers' debts who meet the conditions of the above circular, it is necessary to adhere to the following:

      First:The financing entity (debt seller) must fill out the form for transferring real estate debt (attached) within seven working days of receiving the request from the customer. It should complete all the necessary information while adhering to the accelerated payment standards mentioned in Article 84 of the Implementing Regulation of the Finance Companies Control Law issued by the decision of His Excellency the Governor No. 2/MFC dated 14/04/1434H. which regulates the accelerated payment process, with the necessity of notifying the customer immediately upon issuing the debt transfer document, provided that the offer period specified in the form is not less than ten working days."
       
      Second: After the financing entity (willing to purchase the debt) receives the debt transfer form, it commits to the following:
       
      • Grant credit equivalent to (100%) of the value of the offer specified in the form.
       
      • Obtain a written acknowledgment from the customer that includes all obligations, if any, such as, but not limited to, (property safety, appraisal fees, property guarantee, etc.).
         
       Third:Upon the approval of the financing entity (willing to purchase the debt) and completion of the requirements, a cheque in the amount of the debt is issued and the form is returned to the financing entity (the debt seller) to complete the ownership transfer process within a period not exceeding seven working days from the date of receiving the debt transfer form.
       
      Fourth:The financing entity (the debt seller) must, after receiving the form and the bank cheque, commit to the following:
       
      • Initiate the process of transferring the property ownership to the financing party (the debt buyer) from the date of receiving the bank cheque.
       
      • Update the customer's credit record and issue a clearance letter for the customer.
      Fifth:Taking into account the aforementioned points, the financing entity (willing to purchase the debt) commits to the following provisions, stated in Article 10 of the Implementing Regulation of the Real Estate Finance Law, issued by the decision of His Excellency the Minister of Finance No. 1229 dated 10/04/1434H.
       

       

      Additional Provisions According to Circular No. (391000086876) dated 09/08/1439H.

      It has been observed that some real estate financiers, when purchasing real estate financing debt from another financier, provide the customer with an excess cash amount, resulting in an increase in the amount of the new financing.

      In order to ensure SAMA's commitment to protecting customers and ensuring that financing entities comply with the relevant regulations and instructions, SAMA would like to emphasize the following:

      • Compliance with the provisions of Article (11) of the Implementing Regulation of the Real Estate Finance Law, as well as the subsequent circulars issued by SAMA regarding it, which set the maximum limit for granting credit in real estate finance contracts, in any form of financing, at 90% of the value of the first dwelling for the citizen.
      • Compliance with the accelerated payment standards outlined in Article 84 of the Implementing Regulation of the Finance Companies Control Law, which regulate the process of accelerated payment.
      • Compliance with paragraph (Second) of the above-mentioned circular, which states that "Grant credit equivalent to(100%) of the value of the offer specified in the form".
      • Compliance with the purchase of real estate financing debt at an amount equivalent to the value of the purchase offer only.

      For your information and adherence accordingly. Please note that SAMA will take all legal measures against real estate financiers who do not comply with the provisions of this circular.

       

    • Collecting Amounts Owed to Finance Entities for Previous Periods in Exchange for VAT on Real Estate Finance Contracts

      Referring to The Value Added Tax Law issued by Royal Decree No. M/113 dated 2/11/1438 AH and Executive Regulations of the Value Added Tax Law issued by the Board of Directors of the General Authority for Zakat and Tax under Decision No. (3839) dated 14/12/1438 AH.

      SAMA wishes to emphasize the importance for all financing entities to comply with The Value Added Tax Law, and its Executive Regulations, and the guidelines and instructions issued by the General Authority for Zakat and Tax in this regard. Additionally, SAMA confirms that financing entities have the right to demand that clients pay the Value Added Tax amounts due for previous periods from real estate financing contracts. To facilitate clients, financing entities may offer all possible options for payment or settlement in accordance with the relevant regulations and instructions, provided that written consent is obtained from the client if they accept any payment or settlement option before proceeding with any payment of the due amount. If the client does not accept the available options for settling the VAT amounts due for previous periods, the financing entity may seek recourse through the competent judicial authorities to claim the payment of those amounts. 

      For your information and compliance. SAMA will take the necessary legal measures in the event of non-compliance with these instructions.