Article 2 of the Saudi Real Estate Finance Law
المادة 2 من نظام التمويل العقاري
The article makes the Agency responsible for regulating the real estate finance sector and lists its powers, from licensing financiers to reviewing contracts and setting cost disclosure principles.
Official text (Arabic)
This article has not been amended since the law was issued.
تختص المؤسسة بتنظيم قطاع التمويل العقاري، بما في ذلك ما يأتي:
1 - السماح للبنوك بمزاولة التمويل العقاري بتملك المساكن لأجل تمويلها - استثناءً من حكم الفقرة (5) من المادة (العاشرة) من نظام مراقبة البنوك - وفقاً لهذا النظام وما تحدده اللائحة.
2 - الترخيص لشركات التمويل العقاري وفقًا لهذا النظام ونظام مراقبة شركات التمويل.
3 - الترخيص لشركة مساهمة (أو أكثر) لإعادة التمويل العقاري وفقًا لاحتياجات السوق، ويجوز لصندوق الاستثمارات العامة المساهمة في ملكيتها، وتوافق المؤسسة على المرشحين لمجلس الإدارة، وللممولين المرخص لهم المساهمة في ملكية الشركة، ويطرح للاكتتاب العام جزء من أسهمها وفق أحكام نظام السوق المالية.
4 - الترخيص لشركات التأمين التعاوني بتغطية المخاطر المتعلقة بالتمويل العقاري وفقًا لنظام مراقبة شركات التأمين التعاوني.
5 - إصدار المعايير والإجراءات المتعلقة بالتمويل العقاري، ومراجعة نماذج عقود التمويل العقاري التي يصدرها الممولون العقاريون، والتأكد من مطابقتها لتلك المعايير والإجراءات، وتحقيقها للحماية الواجبة للمستهلك والمستفيد.
6 - نشر البيانات المتعلقة بسوق التمويل العقاري، ورعاية تطوير تقنيات التمويل العقاري، بما في ذلك تقنيات تيسير تدفق البيانات بين السوقين الأولية والثانوية.
7 - تحديد مبادئ الإفصاح عن معايير تكلفة التمويل وطريقة احتسابه؛ لتمكين المستهلك من مقارنة الأسعار.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 2 explained in plain English
This article identifies the regulator of the real estate finance sector, namely "the Agency", which Article 1 defined as the Saudi Arabian Monetary Agency (SAMA). Its powers include:
- Allowing banks to engage in real estate finance by owning homes in order to finance them, as an exception to the provision of paragraph 5 of Article 10 of the Banking Control Law, under this law and as the Implementing Regulations specify.
- Licensing real estate finance companies under this law and the Finance Companies Control Law.
- Licensing one or more joint-stock companies for real estate refinancing according to market needs; the Public Investment Fund and licensed financiers may take part in owning them, the Agency approves the candidates for their boards, and part of their shares is offered for public subscription under the Capital Market Law.
- Licensing cooperative insurance companies to cover real estate finance risks under the Cooperative Insurance Companies Control Law.
- Issuing standards and procedures, and reviewing the finance contract forms that financiers issue, and confirming that they comply with them and provide the due protection for the consumer and the beneficiary.
- Publishing real estate finance market data and sponsoring the development of its technologies, including facilitating the flow of data between the primary and secondary markets.
- Setting disclosure principles on the criteria for the cost of finance and the method of calculating it, to enable the consumer to compare prices.
What matters most to an individual here are paragraphs 5 and 7: contract forms are subject to the Agency's review to protect the consumer and the beneficiary, and cost disclosure is regulated by principles the Agency sets. After it comes Article 3, which requires the financier to engage in finance in a way that does not conflict with the provisions of Islamic Sharia.
If you have concerns about a real estate finance contract, you can consult a lawyer specializing in banking and real estate finance.
Practical example
Ahmed is comparing two offers from two different banks to finance buying an apartment in Riyadh. Under paragraph 7 of this article, the Agency sets disclosure principles on the criteria for the cost of finance and the method of calculating it, so Ahmed can compare prices. The contract form he will sign is also subject to the Agency's review under paragraph 5.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
How we write and review contentBanking, Finance & Securities lawyers: ask a specialist about your case
Describe your situation briefly and we'll suggest a lawyer who specialises in this law
Banking, Finance & Securities lawyers
Lawyers who handle this kind of case
Dr. Ali Al-Rubaie Law Office and Ittihad Al-Asr Legal Company
Dr. Saleh Altayyar & Partners Law Firm
Frequently asked questions about Article 2 of the Saudi Real Estate Finance Law
Who regulates real estate finance in Saudi Arabia?
Under the law, the Saudi Arabian Monetary Agency is responsible for regulating the real estate finance sector.
Does the regulator review real estate finance contracts?
Yes. The Agency is responsible for reviewing the finance contract forms that financiers issue and confirming that they comply with the standards and provide protection for the consumer and the beneficiary.
Must the financier disclose the cost of finance?
The Agency sets disclosure principles on the criteria for the cost of finance and the method of calculating it, to enable the consumer to compare prices.
More articles on Regulating the Real Estate Finance Sector
- Article 3
The article requires the real estate financier to engage in finance in a way that does not conflict with the provisions of Islamic Sharia, as determined by the Sharia committees, and without harming the soundness of the financial system or fairness in dealings.
يزاول الممول العقاري أعمال التمويل العقاري بما لا يتعارض مع أحكام الشريعة الإسلامية؛ بناء على ما تقرره اللجان الشرعية المشار إليها في المادة (الثالثة) من نظام م
- Article 4
The article requires the Ministry of Commerce and Industry, the Ministry of Justice and the Ministry of Housing, each within its remit, to publish real estate market activity data in periodic bulletins.
تنشر وزارة التجارة والصناعة، ووزارة العدل، والوزارة - كل فيما يخصها - البيانات المتعلقة بنشاط السوق العقارية، وذلك في نشرات دورية وفقًا لاحتياجات السوق، وطبقًا
- Article 5
The article requires courts and notary offices to allow licensed real estate financiers to view and obtain the information in real estate registers, as the Implementing Regulations specify.
يجب على الجهات المنوط بها تسجيل الملكية العقارية (المحاكم وكتابات العدل) تمكين الممولين العقاريين (المرخص لهم) من الاطلاع والحصول على المعلومات المدرجة في سجلات
- Article 6
The article allows real estate financiers and real estate refinancing companies to cover real estate finance risks through cooperative insurance, in accordance with the Implementing Regulations.
للممولين العقاريين وشركات إعادة التمويل العقاري تغطية مخاطر التمويل العقاري بالتأمين التعاوني وفقًا لأحكام اللائحة.
- Article 14
The Agency prepares the law's Implementing Regulations, which are issued by decision of the Minister of Finance within 90 days of the law's issuance and take effect after the law comes into force.
تعد المؤسسة اللائحة لهذا النظام، وتصدر بقرار من الوزير خلال (تسعين) يومًا من تاريخ صدوره، ويعمل بها بعد نفاذه.
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.