Regulatory Alerts2020-10-20
Real Estate Financing Contracts Concluded Between Real Estate Financiers on Behalf or by Proxy of Others and Individual Customers Are Subject to Financing Regulations and Instructions Issued by the Organization
The Saudi Central Bank requires all real estate financiers to ensure that individual financing contracts—whether concluded directly, by proxy, or on behalf of third parties—strictly comply with the Organization’s financing regulations, executive bylaws, and approved instructions. Financiers must verify this compliance before concluding new contracts and rectify their agreements with other parties to align with these regulatory requirements. This directive explicitly applies even when the credit granting decision originates from a third party rather than the financier itself.
In the Name of Allah, the Most Gracious, the Most Merciful
Saudi Central Bank Office of the Deputy Governor for Supervision Headquarters
No.: 42013215 Date: 1442/03/04 Attachments: None
Circular
To: Peace, mercy, and blessings of Allah be upon you,
Subject: Real estate financing contracts concluded between the real estate financier (on behalf or by proxy of others) and individual customers are subject to the financing regulations and instructions issued by the Organization.
Based on the authorities vested in the Organization under relevant regulations, bylaws, and instructions. And based on Article (Two) of the Real Estate Financing System, which stipulates that "the Organization is responsible for regulating the real estate financing sector, including: -5- Issuing standards and procedures related to real estate financing." And Paragraph (1) of Article (Nine) of the Executive Regulations of the Real Estate Financing System, which stipulates that "the real estate financier must comply with the requirements specified in this System and these Regulations, other relevant systems and bylaws, and the rules and instructions related to real estate financing issued by the Organization. All real estate financing contracts and products must also comply with this System, systems, regulations, rules, and relevant instructions."
The Organization wishes to confirm that real estate financiers must comply with the financing regulations, their executive bylaws, and the Organization's approved instructions in all individual real estate financing contracts concluded originally, by proxy, or on behalf of others. Furthermore, real estate financiers must not conclude any new contracts unless this is ensured, and must rectify their agreements with other parties in accordance with this directive. This includes contracts where the real estate financier acts as an agent for the funding entity, and also covers cases where the credit granting decision does not belong to the real estate financier. For your information and action accordingly.
Yours sincerely, Fahd bin Ibrahim Al-Shathri Deputy Governor for Supervision
Distribution Scope:
- Banks and investment companies operating in the Kingdom.
- Real estate financing companies operating in the Kingdom.
Al-Huda P.O. Box 2992, Riyadh 11179, Tel: 6773200, Fax: 6772542