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Sheikh Youssef Al Shelash’s Role in the Saudi Mortgage Market

The Saudi government has only allowed mortgages in Saudi Arabia since 2012, as long as they follow Shariah law, which means interest isn’t charged in the traditional sense. Instead, mortgage holders must repay the loan on both the principal part and the part of the home owned by the bank. Sheikh Yousef Al Shelash is the chairman and one of the founders of Saudi Home Loans, a company established in 2007 that helped introduce the concept of mortgages to the region. The company specializes in Shariah-compliant residential mortgages.

Sheikh Yousef Al Shelash said, “There wasn’t a proper regulatory framework [for mortgages] in Saudi. When the company started, regulation was also starting, and we have evolved together.” Saudi Home Loans needed to educate the public on the mortgage concept. 

“People did not understand that they could take a loan for 15 years or 20 years or 25 years,” stated the chairman. “At that time, the full mortgage loan was still not established.” Moreover, people didn’t understand that if they didn’t pay the loan, their houses would be foreclosed, and they would lose their investments. “This was not there. So the main challenge was evolving with the evolution of the regulation,” Sheikh Yousef Al Shelash explained.

Today, mortgages are more commonplace. However, Saudi Arabia continues to have one of the lower mortgage rates in the world. Approximately 8% of homes in the Kingdom are purchased with mortgages, whereas it’s closer to 50% in numerous Western countries. In the United States, for example, 42% of households have mortgages, and mortgage debt accounts for 70% of all American debt, totaling $10.44 trillion. 

Saudi Mortgages Expanded to 30 Years

In the fall of 2022, the Saudi Real Estate Refinance Company, comparable to the United States of America’s mortgage finance agency Fannie Mae, extended the maturity on its benchmark for mortgages to 30 years. Before this, the Kingdom’s long-term fixed rate benchmark had a limit of 25 years. Fabrice Susini, the CEO of the Saudi Real Estate Refinance Company, stated that the purpose is “to accelerate the delivery of affordable home financing, thereby increasing homeownership among Saudi citizens.”

According to Susini, approximately 62% of Saudi nationals are homeowners. The Public Investment Fund, which owns the Saudi Real Estate Refinance Company, stated that it “will further support the development of a robust mortgage market in the Kingdom, providing longer-term liquidity to primary originators.” In addition, the company explained that “it will allow lenders in the Kingdom more flexibility and the ability to offer more sustainable mortgage solutions to borrowers.” 

Not just anyone can purchase property in Saudi Arabia. There are limits on the areas where foreigners can acquire homes. For example, foreigners are banned from buying property in Mecca and Medina, with exceptions made for those who obtained it via inheritance.

Saudi nationals and expats can get home loans in the Kingdom; however, since the market is still being established, many banks will not lend to expats.

Construction is a big business in the Kingdom of Saudi Arabia. A U.S. Saudi Business Council report stated that the region was awarded contracts worth $6.7 billion during Q2 2022. However, for the first time since 2021, the U.S. Saudi Business Council Contract Awards Index dropped from 230 to 188 points during that same quarter.

Albara’a Alwazir, director of economic research at the U.S. Saudi Business Council, stated, “The construction sector continues to perform at a fast pace as several supporting developments have aided in its surge. First, the improved macroeconomic environment spurred by the Kingdom’s oil revenues coupled with ongoing non-oil sector initiatives has helped propel project awards.”

How Sheikh Yousef Al Shelash Made His Mortgage Vision a Reality

Saudi Home Loans was among the first companies to advance home finance. Before mortgages, Saudi nationals were required to save up the total cost necessary to purchase a home, forcing many to remain with parents or relatives while they saved up the money. Since the introduction of mortgages, people no longer need to wait, propelling urbanization across the Middle East since many living in the suburbs can now afford to move to more urban environments. 

Sheikh Yousef Al Shelash earned a Master of Science in law and legal proceedings from the Institute of Public Administration in Riyadh, Saudi Arabia. The successful businessman also attended Imam Mohammad Ibn Saud Islamic University, earning a Bachelor of Science in Shariah. Additionally, he received diplomas in combating financial crimes and banking and has undergone extensive training in financial management and evaluation of investment projects. 

Sheikh Yousef Al Shelash used his experience in law to get into drafting funds. “I recognized that real estate funds could be a big business,” he said. “Because I was a lawyer, people trusted me, and I was able to start acquiring real estate using those real estate funds.” 

Now, after 15 years, there’s a wholly developed mortgage market in Saudi. “There are all of these mortgage lenders, the banks, and the nonbanks. There are also refinancing companies that belong to the government that is also buying mortgages to continue providing liquidity to the market, but this was not there when Saudi Home Loans started,” stated the businessman. “It needed to evolve with regulation, and they needed to convince so many banking institutions to provide funding for these mortgages.”

As the chairman of Saudi Home Loans, Sheikh Yousef Al Shelash guides the company as it provides strategic support from its business partners and shareholders in both the financial and real estate zones. It’s reported to be among the most profitable companies in the nonbank mortgage sector, with an annual growth rate of 40% in net profits in recent years. 

The company is the largest real estate finance company in Saudi Arabia, with a powerful and robust residential portfolio. Saudi Home Loans targets completely digital avenues for the loan creation process, and it has sufficient leveraging to allow the company to grow in line with market needs.

Al Shelash is also the chairman of Dar Al Arkan Real Estate Development Company, building dream homes that can be mortgaged. He explained that one of the most considerable real estate challenges in Saudi Arabia is acquiring top land opportunities. “Land is so scarce in the key areas around the globe,” he said. “It’s finding those land opportunities in key areas because nobody wants the land in an unknown area. We all want the land in key areas. So the first big challenge for a real estate developer is always opportunities in procuring land.”

Since it was founded 28 years ago, Dar Al Arkan has evolved into one of the biggest listed real estate companies in Saudi Arabia. Between that and the Alkhair Capital investment banking company based in Saudi Arabia and registered in Dubai International Financial Center and Saudi Home Loans, Al Shelash has the equivalent of $15 billion worth of assets under management.