Arab News, Mon, May 06, 2024 | Shawwal 27, 1445
Saudi bank loans increase by 11% in March to hit $712bn, fueled by real estate activities
Saudi Arabia:
Saudi banks’ loans totaled SR2.67 trillion ($711.5 billion) in March, marking an
11 percent increase as compared to the same month in 2023, according to the
latest official data.
Figures released by the Saudi Central Bank, also
known as SAMA, showed personal borrowings accounted for 35 percent of this
growth, while the remaining 65 percent went to the corporate sector,
particularly for real estate activities, as well as electricity, gas, and water
supplies.
Real estate financing for corporate dealings
specifically surged by 27 percent in the third month of the 2024, marking the
highest annual growth rate in 10 months, reaching SR275.2 billion.
A study by Mortor Intelligence, which used 2023 as
a base year, estimated the Kingdom’s real estate market at $69.51 billion in
2024, and expects it to reach $101.62 billion by 2029, growing at a compounded
annual growth rate of 8 percent between 2024 and 2029.
The surge in real estate and construction
endeavors may have heightened the need for debt-based financing primarily
sourced from the local banking sector. Saudi banks play a central role in the
provision of loans for real estate projects.
According to SAMA data, new retail residential
mortgage loans experienced a notable increase, reaching a 14-month high at
SR7.63 billion in March. This marked a 5 percent rise compared to the amount
granted in the same month last year and a 10 percent increase from the previous
month.
In March, lending for home purchases accounted for
the largest portion, comprising 64 percent of new mortgages to individuals,
totaling SR4.91 billion. The most notable growth, however, was observed in
apartment loans, surging by 28 percent to reach SR2.24 billion. Meanwhile, land
loans experienced a more modest growth of 4 percent, reaching SR474 million in
new mortgages.
One factor contributing to this growth could be
the need for residential properties from expatriates arriving in the Kingdom,
along with government initiatives aimed at modernizing the financial system.
In a March study by Knight Frank, a notable trend
emerged among expatriates, with 68 percent expressing a strong preference for
owning an apartment rather than a villa. This inclination was especially
prominent among individuals aged 35-45 and 45-55.
Growth in lending for electricity, gas and water
supplies came as the second contributor in corporate loans after real estate,
registering an annual rise of 27 percent to reach SR147.42 billion in March.
According to an April report by Global Data, the
key sectors in the Saudi Arabia power market are the residential sector,
commercial sector, industrial sector, and others. In 2023, the residential
sector had the dominant share in the power consumption market.
The American International Trade Administration
also stated in a January report that Saudi Arabia has experienced rapid economic
and population growth since the discovery of oil. The population is projected to
increase to 40.1 million by 2030.
Due to limited water resources, the country
continues to invest in desalination facilities to meet rising water demands,
aiming to deliver 2.18 billion cubic meters per year of desalinated water.
The Ministry of Environment, Water, and
Agriculture has allocated $80 billion for water projects, with the wastewater
treatment services market also expanding steadily according to the report. In
2021, Saudi Arabia built 133 wastewater treatment facilities, marking a 14.66
percent increase from the previous year.
SAMA data also revealed that financing for
professional, scientific, and technical activities soared by 54 percent, hitting
SR6.4 billion, marking the highest annual growth rate among sectors.
Education loans also showed robust growth, with an
annual increase of 28 percent to reach SR6.27 billion. Additionally, financing
for administrative and support service activities rose by 20 percent, totaling
around SR34.22 billion.
While the proportion of lending allocated to the
scientific and education sectors may currently be modest, the Saudi government
acknowledges their pivotal significance in driving the Kingdom’s comprehensive
transformation agenda.
Recognizing the paramount importance of innovation
and fostering a culture of scientific inquiry, the government has implemented
diverse initiatives aimed at nurturing these sectors.
These efforts are believed to have played a part
in the gradual increase in lending support extended to these sectors by
financial institutions. As the Kingdom continues to prioritize knowledge-based
industries and endeavors, further advancements and investments in these areas
are anticipated to amplify, propelling the nation towards its ambitious
developmental goals.