Saudi Banks Witness Surge in Real Estate Financing

Saudi banks have witnessed a significant surge in loans, reaching SR2.67 trillion ($711.5 billion) in March 2024, marking an 11 percent increase from the previous year. Personal borrowings contributed 35 percent to this growth, while the corporate sector, particularly real estate activities, received the remaining 65 percent. Real estate financing for corporate deals notably rose by 27 percent, hitting SR275.2 billion, the highest annual growth rate in 10 months.

The Kingdom's real estate market is estimated to be $69.51 billion in 2024, with projections to reach $101.62 billion by 2029, growing at an 8 percent annual rate. The surge in real estate and construction projects has led to an increased demand for debt-based financing, primarily sourced from local banks.

New retail residential mortgage loans hit a 14-month high at SR7.63 billion in March, with home purchases constituting 64 percent of new mortgages to individuals. Notably, apartment loans surged by 28 percent, reaching SR2.24 billion, while land loans saw a 4 percent increase to SR474 million.

Expatriates arriving in Saudi Arabia, along with government initiatives to modernize the financial system, have driven the need for residential properties. A study revealed that 68 percent of expatriates prefer owning apartments over villas, especially among individuals aged 35-55.

In the corporate sector, lending for electricity, gas, and water supplies saw a 27 percent annual rise to reach SR147.42 billion in March. The power market in Saudi Arabia is dominated by the residential, commercial, and industrial sectors.

The Kingdom's focus on knowledge-based industries is evident through a 54 percent increase in financing for professional, scientific, and technical activities, reaching SR6.4 billion. Education loans also grew by 28 percent, totaling SR6.27 billion, reflecting the government's commitment to fostering innovation and scientific inquiry.

As Saudi Arabia continues to prioritize these sectors to drive its transformation agenda, further advancements and investments are expected to propel the nation towards its ambitious developmental goals.