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Loan defaults over losses in the Saudi bourse jump

JEDDAH — Loan defaults over losses incurred in the Saudi stock market have increased, according to Finance Minister Ibrahim Al Assaf.

"The rate of defaults to the Real Estate Development Fund (REDF), a major source of real-estate financing in the Kingdom, exceeded 30 percent in 2004," the minister told a Press conference in Riyadh recently.

He added that many real estate lending institutions faced the same problem but with varying degrees of severity.

The Fund extended 510,000 loans worth SR13.4 billion to construct approximately 614,000 housing units throughout the Kingdom until the end of 2006.

Al Assaf said that the defaults led to the decrease in the issuance of new loans. "The current sources of loans for real estate financing are insufficient to meet the increasing demand for housing," he added.

Hassan Al Maghrebi, director of the regional administration of the Saudi Investment Bank in the Western region, said that the recurring fall in the share market is pushing up the demand for real estate as investors shift from securities to investment into equity. "We are, however, at the threshold of a new phase in the development of the real estate sector accompanied," he said.