Syrian President Bashar Al-Assad enacted this week a law enabling the establishment of mortgage finance and refinance companies, which aims to ease the financing of real estate projects but that caps foreigners' share in these companies at 49 percent.
Decree 15/2012 enables the set-up of mortgage finance firms both on conventional and Islamic bases. The law provides a framework for all loans for the building and rehabilitation of properties in the housing, commercial, industrial and tourism sectors. Refinance companies will provide refinancing services to both mortgage finance firms and banks lending for real estate projects.
 
The Government has been announcing for several years the enactment of a law to authorize the establishment of mortgage finance companies. This framework text is theoretically supposed to ease the financing needs of investors in the sector.
 
According to the text of the decree, foreigners' participation in the share capital of these companies is capped at 49 percent. The minimum capital for conventional mortgage finance companies is set at SYP 1.5 billion, while for Islamic firms it stands at SYP 2 billion. Refinance firms need to have a minimum capital of SYP 2.5 billion.
 
The law also establishes a National Organization for Real Estate Finance (NOREF), which is tasked with ensuring the stability of the market. NOREF will have to ensure that the real estate market is liquid and will have the opportunity to issue mortgage-back bonds and to develop a secondary market for these bonds.
 
Decree 15/2012 also enables local banks to establish mortgage finance companies.
 
Besides regulating the set-up of these companies the law also eases the foreclosure process. While these are typically very lengthy and entail going through the corrupt and red-taped Syrian judiciary system, under the new law the foreclosure process is eased and much more straight forward with the lender able to enforce the sale of the mortgaged-property in a short period of time and the borrower authorized to suspend the decision only under very strict condictions.
 
The real estate sector is a main destination for investment in Syria because of it acts as a store of value for individual and institutional investors alike.