Saudi Arabia’s economy, according to the experts, is seeing a downfall, when it comes to the housing sector. While the country is building a futuristic mega-city with talking robots and flying taxis, hundreds of thousands of people are having a hard time to build a home of their own.

Housing is a potential indicator of public discontent in a country where affordable housing remains out of reach for many, a major challenge for Crown Prince Mohammed bin Salman, who seeks to reform the oil-dependent economy of Saudi Arabia.

For decades, the kingdom, which imposed no taxes, has granted interest-free real estate loans.

But with the end of the welfare state, he is now encouraging mortgages as part of a controversial policy change that may be biased against the middle class.

Abdallah, 39, a university student with three children and a tenant in an apartment in Riyadh, dreams of building his own house in a suburb of the capital. After waiting ten years for an interest-free loan from the Housing Development Fund related to the Ministry of Housing, he said he was directed to a commercial bank to borrow 445,000 riyals ($ 119,000). He took out a separate loan for land of 350,000 riyals.

The Fund agreed to repay him a quarter of the loan of 450,000 riyals, but the amount borrowed was not enough and the yard stopped in May.

The bills swallow about half of his monthly salary of 20,000 riyals ($ 5,300) because of the rising cost of living. “The system (mortgages) destroys the middle class, it suffocates us,” he told AFP in front of his half-finished house asking for the restoration of interest-free loans.

These middle-class citizens say they are struggling to repay their loans since the reduction of government subsidies on water, electricity and gasoline, and the imposition of a 5% VAT.

Majid, a 41-year-old official, believes he will not be able to repay a loan with interest, with his salary of 14,820 riyals ($ 3,950), slightly higher than the national average monthly income.

He is among the 500,000 people on the waiting list of the Fund for interest-free loans, according to official statistics. A final decision on their cases should be made by 2020.

To get out of this “housing crisis”, it is necessary “to stimulate the financing of the private sector and to reduce the long-term dependence on the subsidies”, declares to the AFP the Saudi expert Najah al-Otaibi.

Saudi Arabia’s economy is facing difficulties. By 2019, the budget deficit is expected to reach $ 35 billion, or 4.2% of GDP.

“There is a twofold tension: firstly, we must provide affordable housing for the younger generation, which suffers from a higher cost of living, reduced subsidies and unemployment,” explains to AFP Karen Young of the American Enterprise Institute. “Secondly, we must multiply credit products and hope to stimulate growth in consumption.”

The government says it is looking to partner with the private sector to build about 1.5 million affordable housing units in the future.

Home ownership is one of the cornerstones of the Crown Prince’s Vision 2030 reform program.

Some 50 per cent of the 20.7 million Saudis owned their homes in 2017 and this rate is expected to reach 70 per cent by 2030, depending on the ambitions of the program.

The kingdom also wants to reduce the cost of an average home by 2020 to five times the average annual income, compared to 10 times in 2015.

The Ministry of Housing, which has launched several programs to alleviate the crisis, wants to increase total loans to 502 billion riyals (133 billion dollars) by 2020, against 290 billion riyals in 2017.

But some Saudis are dissatisfied with large projects like NEOM, a 500 billion dollar mega-city in the northwest of the kingdom.

In 2011, the late King Abdullah allocated 250 billion riyals to the Ministry of Housing, a measure apparently designed to respond to popular discontent as the events of the Arab Spring swept the region.

“But where are the 250 billion riyals?”

Majid, who has been waiting for a loan from the Fund for years, can only rent a small apartment.

“When my eight-year-old daughter has to change in front of her brothers, I’m ashamed of not having a bigger house, it makes me angry.”

Source — http://fr.le360.ma/monde/en-arabie-saoudite-cest-la-crisedu-logement-195920