Headwinds and Obstacles: Warnings on the Path to the Real Estate Financing Law
As announced, the citizen seeking housing assistance will have two bank loans. The first loan will be equivalent to the 70,000 dinars previously provided interest-free by the Credit Bank. Under this arrangement, the citizen will repay the principal to the banks, while the government will cover the interest payments from the State General Reserve. In essence, this constitutes a new loan from the banks to the government, in addition to previously announced domestic and external bank loans, the Endowment for Future Generations loan, the oil pipelines loan, and most recently, Islamic sukuk. All of these are debts that the government must repay, along with their associated costs and interest, thereby imposing new and significant burdens on public finances and the budget.
The second loan will be repaid by the citizen, including both principal and interest, over a period of 25 years. Here, we must ask: Will the repayment installments for this loan be capped at 40% of the salary for employees and 30% for retirees, in accordance with current Central Bank directives, or will they exceed these limits? Will the interest rate be fixed or variable? If it is variable, it is expected that the problem of loans, which plagued previous governments and legislatures, will resurface. What will happen if some or many citizens default on their bank loans, especially given the government’s move to accelerate retirement? Undoubtedly, they will blame the government, claiming it trapped them in this law, and demand compensation. This is particularly concerning given that Article 12 grants the Credit Bank the right to purchase financing from its lenders—effectively, to buy out the loans! Why was this dangerous clause included, which is undoubtedly an additional burden on public funds?
Furthermore, there is a deep concern that these provisions may serve as a new incentive for citizens to borrow and expand their construction activities, which will inevitably lead to a significant increase in citizens’ financial burdens, expenditures, and consumption of services. Instead, the government should be warning against excessive borrowing and encouraging reduced construction and spending.
It is also noteworthy that what has been announced to date does not clarify how Islamic banks will be handled, especially since some of the provisions are inconsistent with the Sharia-compliant nature of these banks.
I believe—and God knows best—that the banks will be the primary beneficiaries of this law, as it will provide them with a new source of substantial and growing annual profits.
I hope that these concerns are clearly before the decision-makers and that any such risks are mitigated. If left unaddressed and allowed to accumulate over the years, they will have significant impacts and burdens on both public funds and citizens alike.
