SAUDI ARABIA – The Kingdom issues new finance laws

September 2012

THE Saudi Council of Ministers has issued a package of five new laws which many believe will dramatically change the finance market in the Kingdom of Saudi Arabia. These new laws have been anticipated for a while.

Although the Kingdom has avoided much of the unrest sweeping the Arab world, experts believe that the region’s political upheavals, which were triggered by youth unemployment, lack of proper housing and economic pressure, have helped push the laws back on to the government’s agenda.

The new laws are as followed:

» The Execution / Enforcement Law ll

» The Finance Lease Law

» The Real Estate Mortgage Law

» The Real Estate Finance Law

» The Law on Supervision of Finance Companies.

The copies which are yet to be published, will take effect 90 days after the Royal Decree which was issued at the beginning of July, stated the Minister of Finance Dr. Ibrahim Al-Assaf.

“The earlier drafts of these Laws indicated that they were to come into effect after 90 days from the date of publication in the Official Gazette,” according to Al Tamimi & Co.

On the occasion, Al-Assaf said the mortgage law would develop a new real estate finance market in the Kingdom. It will also help Saudis get Shariah-compliant finance to build their homes.

The implementing regulations of the Finance Laws -which is likely to refer to the Finance Lease Law, the Real Estate Finance Law and the Law on Supervision of Finance Companies- are to be drafted by the Saudi Arabian Monetary Agency (SAMA).

Al-Assaf said SAMA would allow banks and licensed companies to finance real estate projects. The state-owned Public Investment Fund has been allowed to participate in the new real estate holding companies that are to be licensed by SAMA.

Commenting on the new move, Hesham Al Homoud, head of Al Tamimi’s Corporate and Commercial Department in Riyadh, said: “The introduction of these new laws has been keenly awaited for some time. A draft of the Real Estate Mortgage previously sighted by us, provided for the introduction of a system under which mortgages over Saudi land could be registered in favour of financiers and the registered mortgagee would have priority rights against third parties.”

He further added: “We also expect the other laws included in the package to have a very significant impact upon the Finance Industry in KSA, both in terms of regulation and the way in which banks and other finance providers conduct business in KSA.”