Loan guarantees for financing real estate development activities in Algerian law

Abstract

The real estate loan is one of the most prominent financing mechanisms for real estate development projects. Financial institutions impose legal guarantees in exchange for granting loans so as to ensure the retrieval of their rights. These guarantees can be divided, in case of non-fulfillment of the loan, into personal guarantees such as "surety," and tangible guarantees, such as "official mortgage." In addition to these previously mentioned guarantees, insurance is considered a newly introduced guarantee, along with financial guarantees for the real estate loan, such as mortgage refinancing and securitization. These guarantees finance real estate loans on one hand and reduce the risks that banks may face as lending institutions on the other hand which enhances their confidence and enables them to grant loans with ease. Therefore, the aim of this study is to introduce the various types of these guarantees as important means on which banks rely in granting real estate loans. The paper aims to define these guarantees, highlight their key features, address the associated challenges, and assess their effectiveness in securing these loans and enhancing banks' creditworthiness to facilitate loan provision.