All banks in the Kingdom are now required to lay out how they plan to liquidate real estate assets acquired through debt settlements, following a decision from the Saudi Central Bank (Sama). Sama will no longer accept one-off extension requests, forcing banks to bake these liquidations into a board-approved annual strategy.
Why it matters: The decision is essentially a liquidity injection designed to bridge the gap between oversubscribed housing funds and a banking sector that needs to deploy capital more efficiently, MENA economist Hamzeh Al Gaaod told EnterpriseAM. By mandating upgrades and setting strict timelines for property readiness, the regulator is essentially prepping the market for a massive structural shift in five years, when Riyadh’s current rent freezes are set to expire, Al Gaaod added.

The details

Under the new rules, banks have a hard three-year window to offload any property not used for their own operations or employee housing. The shift here is from reactive to proactive; instead of asking for permission to hold onto a specific asset when a deadline hits, banks must now bake their exit strategies into a formal, annual roadmap, according to the statement.

Banks are required to submit their liquidation plans within 30 days of the end of the year. These plans must undergo management review and receive approval from the banks’ boards of directors, with the review reports subsequently submitted to the Central Bank.

Semi-annual audits: In addition to the annual plan, banks must provide Sama with a detailed semi-annual statement of all real estate acquired in settlement of outstanding debts to ensure ongoing compliance.

The directive mandates disclosure of all real estate holdings, including assets approaching the end of their statutory holding period, those for which an extension is being sought, and properties still within the initial three-year regulatory window.

The big picture

The move comes to diversify investment options to allow foreign investors to own real estate directly, Al Gaaod told us. We’re seeing a total legislative rewiring of the Saudi real estate market. The move follows the landmark Foreign Ownership Law, which comes into effect this week, and the Law on Expropriation for Public Benefit and Temporary Seizure of Real Estate, which became effective on Saturday. By clearing bank balance sheets of “legacy” properties, the state is clearing the way for a more liquid, transparent market capable of absorbing the global capital expected to flow into the Kingdom’s urban mega-projects.

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