RIYADH, 30 August 2006 — The Real Estate Development Fund (REDF) is facing a big problem. A whopping SR30 billion is outstanding from people who availed housing loans, but have defaulted on repayment. An official of the REDF told Arab News that as a result of the repayment problem, the Fund has now started deducting salary from the beneficiary’s bank account.
In the past, when employees used to receive their salaries in cash, they had to visit any branch of the Saudi commercial bank and credit the amount in the Fund’s bank account. While some repaid the loan, many others either delayed or stopped repayments.
Under the new policy announced by the Fund, it has opened accounts with three local banks, where the amount due could be deposited in its account. Also, the beneficiary has to sign a contract authorizing his bank to deduct the housing loan in monthly installments agreed to by him.
The spokesman said that many Saudis believe that they need not repay the loan, since the money belongs to the government. “We tried to educate the Saudis that when they borrow the money, they have to repay it. But they don’t seem to understand,” he observed. The Fund, he pointed out, also sought the assistance of Imams or preachers, who appealed during Friday sermons to the beneficiaries of housing loans not to default on repayment. But apparently it did not have any impact.
According to the statistics released by the Fund, REDF paid SR1.183 billion this year. This financed the construction of 5,100 houses in different parts of the Kingdom. The Fund’s capital has increased by SR18 billion following the directive issued by Custodian of the Two Holy Mosques King Abdullah, according to Muhammad Al-Harbi, director general of the Fund.
He pointed out that the Fund’s new policy, together with the royal gesture, would go a long way in extending housing loans to a wider section of the Saudi population. The Fund, he observed, could have helped build thousands of additional houses if the people regularly repay their loans.
Retirees contacted by Arab News said it was not fair on the part of REDF to deduct the amount from their meager salaries. Speaking on condition of anonymity, a beneficiary said that when an employee retires, he has to get clearance from REDF that he is not in arrears.
If he is, then the amount owed to REDF is deducted from the retirement benefits and the balance credited into his account. They also point out that some Saudis claim to be poor when it comes to repayment of REDF loans. Yet, they own houses, land or commercial property from which they have a steady income. “This is unfair, because the Fund exempts poor people from repayment, although the so-called poor category belongs to the wealthy class,” he added.
