An effective mortgage finance system can make an important contribution to economic growth, household welfare, urban development, and even labor mobility. Establishing an effective mortgage finance architecture can be challenging, however. Housing is made affordable by a robust lending system that can facilitate long-term transactions, spread large investment costs, and use fixed interest rates for stability purposes. These features are not present in most emerging economies and are difficult to build. Without such a system, however, lending remains short term and restricted. Housing finance, including lending for commercial and development investments, can destabilize a financial system, particularly if fed by economic cycles, as demonstrated by the recent global financial crisis.
The Middle East and North Africa (MENA) lags behind other regions in making market resources available for housing. The lack of access to housing finance is reflected in the low share of mortgage loans in loan portfolios and the large deficit of housing units. The nascent housing finance market must be further developed to meet the needs of young households looking for affordable housing while containing the risks associated with an unbalanced expansion of housing finance.
The report outlines a series of recommendations to develop the housing finance in the MENA region, including improving the transparency of the real estate market, strengthening mortgage market infrastructure, developing and modernizing the framework for mortgage related securities, strengthening prudential frameworks, and developing prudential norms for the management and mitigation of liquidity and market risks.