Regulatory Alerts2018-04-09
Compliance with standard forms for real estate financing contracts in Murabaha and Ijara formats for individuals
The Saudi Central Bank mandates all licensed banks and real estate financing companies operating in the Kingdom to adopt the newly issued standard contract forms for individual Murabaha and Ijara real estate financing agreements as a minimum baseline. Financial institutions must complete all internal compliance procedures, including mandatory Shariah Committee endorsement, by May 25, 2018. Any execution of real estate financing contracts that deviate from these standardized formats is strictly prohibited after the specified deadline.
In the Name of Allah, the Most Gracious, the Most Merciful
Saudi Central Bank Head Office
General Directorate for Supervision of Financing Companies
Ref. No.: 391000082220 Date: 23/07/1439 AH Corresponding Date: 10/04/2018 AD Attachments: Approval and Review
Circular
To: Peace, mercy, and blessings of Allah be upon you.
Subject: Standard Form for Individual Real Estate Financing Contract under Murabaha Format and Individual Real Estate Financing Contract under Ijara Format
Based on the authorities granted to the Bank under the Banking Control System issued by Royal Decree No. (5/M) dated 22/02/1386 AH, and the Financing Companies Control System issued by Royal Decree No. (51/M) dated 13/08/1433 AH, and under Paragraph (2) of Article (Eight) of the Executive Regulations of the Real Estate Financing System, which stipulates that "the Bank shall establish standard forms for real estate financing contracts, and real estate financiers shall comply with those standard forms unless otherwise specified", and under Paragraph (2) of Article (Ten) of the Executive Regulations of the Financial Leasing System, which stipulates that "the Bank shall approve standard forms for financial leasing contracts that consider the rights of the concerned parties".
And in pursuit of the Bank's objectives to achieve the goals of standard contract forms and realize the principle of fairness among real estate financiers, real estate financiers must comply with the standard form for individual real estate financing contracts under the Murabaha format (as a minimum) and the standard form for individual real estate financing contracts under the Ijara format (as a minimum), and complete the necessary procedures according to their adopted policies, including Shariah Committee approval, by no later than 10/09/1439 AH corresponding to 25/05/2018 AD, and shall not enter into any contracts that contradict the attached standard contract forms after this date.
For your information and compliance.
Yours sincerely,
Ahmed bin Abdullah Al Sheikh Deputy Governor for Supervision
Distribution Scope:
- Banks and commercial banks operating in the Kingdom.
- Real estate financing companies operating in the Kingdom.
P.O. Box 2992, Riyadh 11169, Tel: +966 11 4662020, Fax: +966 11 4662488