RIYADH: Real estate loans by Saudi Arabia’s commercial banks climbed to a record SR922.2 billion ($245.9 billion) in the first quarter of 2025, marking an annual increase of just over 15 percent.

Based on data from the Kingdom’s central bank, also known as SAMA, this expansion is the fastest year-on-year growth in nearly two years, and underscores a robust resurgence in property financing.

This was driven chiefly by a surge in lending to commercial real estate projects even as home mortgages, which still form the lion’s share, grew at a more moderate pace.

Saudi banks’ retail mortgages, which are primarily home loans to individuals, accounted for about 75.8 percent of total outstanding real estate credit in the first quarter, reaching SR698.8 billion.

This represents an 11.7 percent year-on-year rise. Corporate real estate loans — the funding provided to developers and commercial ventures — grew nearly 27.5 percent over the same period to SR223.4 billion, outpacing the retail segment’s growth several times over.

Although smaller in absolute terms, the corporate real estate portfolio has been expanding at its fastest pace in almost a decade according to SAMA data, boosting its share of total real estate credit to roughly 24 percent and signaling a significant shift in banks’ lending focus.

Drive to boost home ownership

This marked rebalancing comes after a prolonged period during which Saudi bank lending was largely fueled by residential mortgages. Over the past few years, government-backed housing programs helped drive home ownership from under 50 percent a decade ago to over 65 percent by 2024.

That mortgage boom saw banks’ loan books tilt heavily toward retail customers. Now, a structural pivot is underway. Companies and developers have become the dominant force in credit growth as banks pivot from consumer finance to funding large projects and enterprises.

Business loans across all sectors now make up 55.3 percent of Saudi bank lending as of May according to SAMA data, up from about 52.9 percent a year ago, with corporate credit growing over 21 percent year on year, more than double the 10 percent rise in personal lending.

Bank credit to real estate has accelerated in tandem with high-profile initiatives, from new residential communities in major cities to the gigantic NEOM smart city, as well as Red Sea tourism resorts and other large mixed-use projects that require substantial funding for land acquisition, construction and development.

The momentum is further bolstered by upcoming global events like the 2030 FIFA World Cup and Expo 2030, which are expected to inject capital and spur even more infrastructure and real estate development in the lead-up to those events.

This reflects massive projects such as new airports, rail lines, and ports that are moving ahead and require significant funding. The government’s National Transport and Logistics Strategy envisages about $150 billion in infrastructure investments by 2030, with 80 percent of that expected to come from the private sector via public-private partnerships.

Accordingly, banks are playing a pivotal role by lending to contractors and logistics firms involved in these ventures, ensuring that crucial projects have the financing they need.

Policy support and bank strategies

Saudi authorities have actively fostered an environment to support this lending shift toward commercial projects. Strengthening the real estate and financial sectors is a key goal of Vision 2030, and the government has rolled out measures to encourage private investment in large developments.

One major approach is the promotion of public-private partnerships and improved financing mechanisms to draw in non-government capital. The government is collaborating with banks and investors to streamline funding for mega-projects, including establishing new specialized financing companies and joint venture models that ease funding constraints.

The Private Sector Participation Law enacted in 2021 provides a transparent legal framework for domestic and foreign investors to take part in infrastructure and real estate projects alongside the public sector.

By simplifying regulations, offering incentives, and even initiating early phases of key projects itself, to demonstrate viability, the state aims to boost private-sector confidence and lending to these ventures.

These initiatives are creating a more conducive climate for banks to extend credit to corporate clients, knowing that many projects have government backing or facilitation.

At the same time, Saudi banks themselves are adapting their strategies to sustain the lending boom while managing risks. Banks remain well-capitalized and have robust capital buffers, with sector-wide capital adequacy around 19 percent according to SAMA data, enabling them to expand credit without compromising stability.

Many lenders are also exploring innovative ways to unlock liquidity and fund new loans. 

Industry analysts point out that banks are considering mortgage securitization, converting pools of home loans into bonds that can be sold to investors, as a means to free up balance sheet capacity.

A recent report by Fitch Ratings likewise noted that turning mortgage assets into tradable securities would expand Saudi Arabia’s debt market and give banks an additional funding boost.

Such financial agility, combined with disciplined cost control and solid deposit growth, positions the banking sector to actively support the Kingdom’s development priorities and finance Vision 2030 initiatives on a larger scale.

Saudi interest rates, which move in tandem with US Federal Reserve policy, have risen to their highest levels in nearly two decades, a factor that might ordinarily cool credit demand. 

However, the strategic importance and expected returns of mega-projects mean that demand for credit remains strong even in a high-rate climate.

Many large-scale developments benefit from government guarantees or contracts that make bank financing viable despite higher interest costs, and banks are competing to syndicate and participate in these deals.

RIYADH: Saudi Arabia’s Tadawul All Share Index slipped on Thursday, falling 38.13 points, or 0.35 percent, to close at 10,945.80. 

The total trading turnover of the benchmark index reached SR4.92 billion ($1.31 billion), with 112 stocks advancing and 137 declining. 

The Kingdom’s parallel market Nomu gained 120.10 points, or 0.45 percent, to close at 26,898.25. A total of 49 listed stocks advanced, while 24 retreated. 

The MSCI Tadawul Index also edged down, losing 3.66 points, or 0.26 percent, to close at 1,408.07. 

The best-performing stock of the day was Saudi AZM for Communication and Information Technology Co., whose share price surged 9.96 percent to SR29.14. 

Other top performers included Northern Region Cement Co., which saw its share price rise 6.29 percent to SR8.11, and Obeikan Glass Co., which climbed 6.20 percent to SR37.

Sport Clubs Co. recorded the most significant drop, falling 7.34 percent to SR10.22. 

Gulf Union Alahlia Cooperative Insurance Co. also saw its share price decline by 4.56 percent to SR14.22. 

National Medical Care Co. dropped 3.51 percent to close at SR164.80. 

On the announcements front, Electrical Industries Co. released its interim financial results for the period ending June 30.

According to a Tadawul statement, the company recorded a net profit of SR260 million during the first six months of the year, reflecting a 47.9 percent rise compared to the same period a year earlier. The increase in net profit was attributed to a broader product mix and higher sales of items with stronger profit margins. 

Electrical Industries Co. ended the session at SR8.99, down 2.21 percent. 

Alinma Bank also announced its interim financial results for the first half of the year. A bourse filing revealed that the company recorded a net profit of SR3.08 billion in the period ending June 30, up 12.8 percent year on year.

This increase was primarily linked to growth in total operating income. Net income rose as operating income expanded by 8.5 percent, driven mainly by higher returns from financing and investments, along with increased fee and foreign exchange income. 

The bank also announced the board of directors’ recommendation to distribute SR746 million in cash dividends to shareholders for the second quarter of 2025.

According to a Tadawul statement, the total number of shares eligible for dividends stood at 2.4 billion, with a dividend per share of SR0.30 after the deduction of Zakat. The dividend represented 3 percent of the share’s par value. 

Alinma Bank closed the session at SR26.38, down 1.60 percent.