Controls for Banks and Real Estate Finance Companies Owning Real Estate Located within the Cities of Makkah and AL-Madinah

In the name of Allah, the Most Gracious, the Most Merciful Saudi Central Bank Headquarters

General Directorate of Supervision of Finance Companies Ref No:
Attachments:

59890 / 99 : Ref No
1440/04/25 : Date
None : Attachments

Circular

Dear Sirs,
Peace, mercy, and blessings of God be upon you, Subject: Controls for Banks and Real Estate Finance Companies Owning Real Estate Located within the Cities of Makkah and Al-Madinah.

Based on the powers granted to the Saudi Central Bank under the Banking Control System issued by Royal Decree No. (M/5) dated 22/6/1386H, the Real Estate Financing System issued by Royal Decree No. (M/5) dated 13/8/1433H, and the Finance Companies Control System issued by Royal Decree No. (M/5) dated 13/8/1433H, and implementing Cabinet Resolution No. (494) dated 14/9/1439H approving the amendment of Article (Fifth) of the System of Non-Saudis Owning and Investing in Real Estate, wherein Paragraph (1/C/2) of that Article exempts banks and licensed real estate finance companies from the definition of (Non-Saudi) prohibited from owning real estate in the cities of Makkah and Al-Madinah, subject to controls set by the Saudi Central Bank, limited to owning real estate for financing Saudi nationals, as well as real estate designated for their headquarters, branch offices, or necessary for conducting their business.

You will find enclosed a copy of the Controls for Banks and Real Estate Finance Companies Owning Real Estate Located within the Cities of Makkah and Al-Madinah. The Saudi Central Bank emphasizes to banks and real estate finance companies the immediate commencement of necessary measures to ensure compliance with these controls.

For response and implementation.

Accept my regards,

Fahd bin Ibrahim Al-Shathri
Deputy Governor for Supervision

Distribution List:

• Banks and General Branches in the Kingdom.
• Public Real Estate Finance Companies in the Kingdom.

P.O. Box 2992, Riyadh 11169, Phone: +966 11 4662020, Fax: +966 11 4662488

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Controls for Banks and Real Estate Finance Companies Owning Real Estate Located within the Cities of Makkah and Al-Madinah Rabi' al-Thani 1440H / December 2018CE

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Table of Contents

Page No.	Section
3	Preamble
3	Chapter One: Definitions
4	Chapter Two: General Provisions
4	Chapter Three: Final Provisions
4	Chapter Four: Enforcement

Preamble:
These controls apply to banks and finance companies operating in the Kingdom when owning real estate located within the cities of Makkah and Al-Madinah. The Saudi Central Bank is the supervisory authority authorized to apply these controls and take necessary measures regarding any violation of these controls, including imposing penalties in accordance with the provisions of the Banking Control System issued by Royal Decree No. M/5 dated 22/07/1386H, the rules for applying the provisions of the Banking Control System issued by Ministerial Decision No. 3/2149C dated 14/10/1406H, the Real Estate Financing System issued by Royal Decree No. M/50 dated 13/8/1433H, the Finance Companies Control System issued by Royal Decree No. M/51 dated 13/8/1433H, and its Executive Regulations issued by Resolution of the Governor of the Saudi Central Bank No. 2/M Sh T dated 14/4/1434H, the System of Non-Saudis Owning and Investing in Real Estate issued by Royal Decree No. M/15 dated 17/4/1421H, and Cabinet Resolution No. (494) dated 14/9/1439H approving the amendment of Article Fifth of the System of Non-Saudis Owning and Investing in Real Estate.

Chapter One: Definitions
-1 The following words and expressions, wherever they appear in these controls, have the meanings indicated opposite each of them, unless the context dictates otherwise.

Controls: Controls for Banks and Real Estate Finance Companies Owning Real Estate Located within the Cities of Makkah and Al-Madinah.
The Institution: The Saudi Central Bank.
Banks: Banks and finance companies operating in the Kingdom.
Real Estate Finance Companies: Joint stock companies licensed to conduct real estate financing activities.
Non-Saudi: A natural person who does not hold Saudi Arabian nationality, or a non-Saudi company, or a Saudi company established or co-founded or owned by any natural or legal person who does not hold Saudi nationality.

Chapter Two: General Provisions
-2 Without prejudice to related systems, the ownership of real estate in the cities of Makkah and Al-Madinah by banks and real estate finance companies shall be for the purpose of financing beneficiaries, or such ownership shall be specific to their headquarters, branch offices, or necessary for conducting their business. -3 Without prejudice to the provisions of the System of Non-Saudis Owning and Investing in Real Estate, the financing referred to in Paragraph (2) of these controls is limited to natural or legal persons who hold Saudi nationality only, in accordance with the systems in force in this regard issued and approved by the competent authorities.

-4 Banks and real estate finance companies are prohibited, with respect to real estate they own in the cities of Makkah and Al-Madinah for use as (establishing branches / housing for their employees), from selling such real estate to non-Saudis. -5 Banks and real estate finance companies are prohibited, with respect to real estate that becomes owned by them in the cities of Makkah and Al-Madinah due to customer default on payments or their unwillingness to own at the end of the contract in case the real estate financing contract is in the Ijarah format, from selling such real estate to non-Saudis. -6 Banks and real estate finance companies must exercise due diligence to ensure that the ultimate beneficiary of real estate financing in the cities of Makkah and Al-Madinah is of Saudi nationality, with respect to real estate owned by the bank or real estate finance company related to existing financing contracts. -7 Banks and real estate finance companies must restrict individual real estate financing contracts to the standardized contract formats issued by the Institution for this purpose. -8 Banks and real estate finance companies must notify the Institution in sufficient time before owning or selling real estate located in the cities of Makkah and Al-Madinah, and must provide sufficient information about the real estate and the buyer. -9 Banks and real estate finance companies must provide the Institution with quarterly reports including cases of (ownership / sale / vacancy) of real estate located in the cities of Makkah and Al-Madinah.

Chapter Three: Final Provisions
-10 Banks and real estate finance companies must apply what is stated in these controls, in addition to complying with all related systems, regulations, rules, controls, and instructions issued by the competent authorities.
-11 Banks and real estate finance companies must comply with the mandatory instructions for providing individual real estate financing products issued by Circular No. 99/4654 dated 02/09/1439H.
-12 Banks and real estate finance companies must comply with the Institution's Circular No. 381000074831 dated 14/07/1438H regarding the definition of commercial real estate financing.

Chapter Four: Enforcement
-13 These controls shall be effective from the date of their issuance.