Government | Tuesday 6 February, 2018 12:22 am |

Saudi Arabian authorities announced plans on Monday to spend SR120 billion ($32 billion) on subsidized home loans for borrowers in a bid to expand the private sector role in the mortgage market, according to a report from Bloomberg.

The program also includes SR18 billion loan-guarantee system to boost access to funding as well as SR12.5 billion to support home down-payments to be spent through to 2030, Housing Minister Majed Alhogail said in an interview.

Authorities are looking to expand the mortgage market by 70 percent to reach SR502 billion and Saudi citizen home ownership from 50 percent to 60 percent by 2020 largely through increased private-sector participation, Alhogail added.

Currently, the government provides 65 percent of home loans.

“We want to change that completely,” Alhogail told Bloomberg. “It’s a very generous program. It’s enabling the private sector, reducing their risk to a certain level.”

The new funding is part of a push to lift home ownership among Saudi citizens from 50 percent to 60 percent by 2020. Housing policy is part of Crown Prince Mohammed bin Salman’s Vision 2030 economic transformation plan.

The Saudi Arabian government will monitor conditions and adjust policies “to ensure there is no bubble” in the housing market, Alhogail said.

“As you know, when you launch a very strong program like this, you expect the price could increase,” he said. “You could expect more defaults, because you are lending to people who don’t have steady income.”

The kingdom is aiming to build 125,000 housing units in 2018, compared to 110,000 last year. Most of the new units will cost between SR250,000 to SR750,000, Alhogail said.