Thank you for the advise but here is what worked for me. I did not do your advise because I just read it now and the issue has been resolved.
The problem was that the belt did not retract all the way back because it got stuck on the back side support of the seat, and so when someone tried to pull it, it was already locked. What I did is that I moved the seat a bit so the belt won't get stuck on it and so now it retracts fully.
Never had a problem with it ever since the posting.
Originally Posted by david528
A few of my customer cars have had this problem (not just BMW).
get a diluted bucket of soapy warm water (few drops of dish soap in a bucket will do) and a clean towel/old tshirt
slowly and gently pull the seat belt all the way out until there's no more left to pull. Get the towel damp, and slowly wipe the seatbelt as you let it retract. Dunk the towel a few times in between and ring it out and continue to wipe the belt as it is retracting (so you don't spread the dirt around).
If the belt still getting stuck, repeat, except this time, get some clear silicon lube and give the slot where the belt comes out a few shots while the belt is fully out (don't soak it), you're trying to hit the retractor wheel in the pillar.