The Saudi central bank (SAMA) is preparing rules for mortgage financing and monitoring of finance companies, its governor said on Tuesday following the cabinet’s approval of a long-awaited mortgage law draft.

Saudi Arabia cleared Monday the draft expected to help solve a chronic housing shortage in the oil-producing kingdom. The limited supply of low and medium-cost housing has been one of the key inflationary factors in recent years.

"These regulations with all their contents will be published on SAMA’s website in order to receive views of specialists and beneficiaries in preparation for their issuance after coordinating with the relevant government agencies," Governor Fahad Al-Mubarak said on SAMA’s website www.sama.gov.sa.

The new law will allow, for the first time, the creation of products secured against property, meaning the borrower can benefit from ownership of the asset.

Finance Minister Ibrahim Alassaf told Saudi Press Agency Monday that the law would be implemented within 90 days after SAMA completes the regulations.

Mubarak said SAMA’s regulations would include action mechanisms for mortgage financing, consumer rights and support to beneficiaries in addition to listing means of refinancing through securities covered by mortgages.

He also said that the central bank would amend rules for financial leases addressing current weaknesses in the regulation. The mortgage law is expected to be a boon for banks, by creating a new revenue stream. Annual demand has been put at 150,000 and 200,000 units per year, according to real estate service company Jones Lang LaSalle.

The law comes after King Abdullah ordered construction of 500,000 new homes last year as a part of an overall spending package estimated at $ 110 billion, or 19 percent of gross domestic product, aimed to ease social tensions.

Rental inflation in the world’s top oil exporter has been keeping above 10 percent so far this year, less than half the levels seen in 2008 when the global financial crisis pierced a property bubble in the Gulf.

Overall annual consumer price growth in the OPEC member, which pegs its riyal to the US dollar, has remained above the 5 percent mark in January-May, the highest level in the region.