New home loan system disappoints applicants


Saudi Gazette report

— The Real Estate Development Fund (REDF) office in Olaya Street in northern Riyadh is a narrow one and cannot accommodate the large number of home loan applicants who come there with big dreams.

Visitors are greeted by the sign "Your home loan is now easy," giving the impression that they are in front of a bank or a financial institution.

The REDF has changed its status from provider of home loans to promoter of home loans given by banks and financial corporations. This U-turn by the the Fund has disappointed hundreds of Saudis who have been waiting for home loans for more than 15 years. Banks not only charge huge interest rates on loans but also put obstacles before the applicants.

Despite the delay in obtaining loans from the REDF due to large number of applicants, citizens have been so far happy with the Fund as it does not charge any interest on loans and its monthly installment does not exceed SR1,600. The Fund also used to write off unpaid installments in case a beneficiary dies.

The Fund's office along the Olaya Street does not have enough parking facility. "Many people come to the Fund's office on Olaya Street with the hope obtaining loans to build their dream homes. But most of them leave it with broken hearts," said Khaled Al-Harthi, a reporter of Al-Watan Arabic daily who visited the REDF office recently.

Over the past several years REDF has helped thousands of Saudis to build houses. The Fund's role is now to receive home loan applications from citizens and transfer them to commercial banks and financial corporations, which operate in the second floor of the same building.

Every bank has different conditions and requirements to give loans. Applicants have to pay 10 percent of the home's value with compound interest, which in some cases would reach double the price of the housing product. "These are difficult conditions for many," Al-Harthi said.

Many citizens have opposed REDF's new strategy and said it was against Royal Decree No. 82 that exempts citizens who have submitted their applications before June 25, 2011, from the new system. These applicants have submitted their complaints to the Administrative Court against the Fund.

Courts in different parts of the Kingdom looked into several such cases over the past few months and the applicants won favorable verdicts to receive a REDF loan of SR500,000. "The remaining applicants have confidence in the fairness of the Saudi justice," Al-Harthi said.

Some applicants have already purchased plots of land to build houses and have been waiting for the Fund's loan for up to 15 years. Many of them are disappointed when the banks asked them to purchase readymade flats or villas.

Informed sources at the Housing Ministry said the applicants who had purchased land would be given loans from March to build houses on their plots but it would be financed by banks charging interest, Al-Watan reported.

The ministry has previously announced that citizens who receive a monthly salary of less than SR14,000 will receive 100 percent financial support to build homes without any interest. But the banks give priority to applicants who do not have debts and have substantial liquidity to pay back their loans.

"These conditions have disappointed many applicants," said Al-Harthi.

Miteb Al-Diyabi said he has been waiting for the REDF loan for the past 12 years. "Many of the applicants who have not yet received loans or homes would approach courts to get loans from the Fund on the basis of the previous norms," he added.

Hamoud Al-Osaimi, spokesman for REDF, has confirmed that many citizens have asked the Fund to follow its previous system, and many of them have won favorable verdicts from courts.

"The REDF supports the demand of citizens and wanted all applicants to receive their full rights. The Fund is ready to implement the court verdicts," Al-Osaimi told Al-Watan.