Article 3 of the Saudi Real Estate Finance Law
المادة 3 من نظام التمويل العقاري
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.
Official text (Arabic)
This article has not been amended since the law was issued.
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 مراقبة شركات التمويل، وبما لا يخل بسلامة النظام المالي وعدالة التعاملات.
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 3 explained in plain English
This article sets three requirements that the real estate financier must observe. Under Article 1, financiers are commercial banks and finance companies licensed to engage in real estate finance:
- No conflict with the provisions of Islamic Sharia, based on what the Sharia committees referred to in Article 3 of the Finance Companies Control Law determine. The reference for determining Sharia compliance is therefore the decisions of those committees.
- No harm to the soundness of the financial system.
- No harm to fairness in dealings.
These requirements govern the real estate finance business the financier carries on. The article does not explain how the Sharia committees are formed or how they work, but merely refers to the committees referred to in Article 3 of the Finance Companies Control Law.
Article 2 comes before it, making the Agency responsible for regulating the sector, including issuing standards and procedures and reviewing finance contract forms to confirm they provide due protection for the consumer and the beneficiary. Article 4 follows, on publishing data relating to real estate market activity.
The text is not content with Sharia compliance but adds to it the requirements of soundness of the financial system and fairness in dealings. If you believe your finance contract contains unfair terms, you can consult a lawyer specializing in banking and real estate finance.
Practical example
A finance company in Jeddah offers a new product to finance buying villas. Before offering it, the product must not conflict with the provisions of Sharia as determined by the Sharia committee referred to in the Finance Companies Control Law, and must not harm the soundness of the financial system or fairness in dealing with customers.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 3 of the Saudi Real Estate Finance Law
Must real estate finance comply with Sharia?
Yes. The real estate financier engages in its business in a way that does not conflict with the provisions of Islamic Sharia, based on what the Sharia committees determine.
Who decides whether real estate finance complies with Sharia?
The Sharia committees referred to in Article 3 of the Finance Companies Control Law.
Is Sharia compliance alone enough?
No. The article also requires that the finance not harm the soundness of the financial system or fairness in dealings.
More articles on Regulating the Real Estate Finance Sector
- Article 2
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.
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)
- 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.