Bloomberg/Simon Dawson

Sukuk

Saudi Real Estate Refinance Company mulls $2.3 billion Sukuk issuance

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The Kingdom has taken a number of measures to increase home construction and lending as it seeks to overcome one of the world’s lowest mortgage penetration rates.

Monday 11, March 2019

(Bloomberg) --Saudi Arabia’s first mortgage-refinancing firm is set to debut in the bond market with a plan to raise as much as SAR 8.5 billion ($2.3 billion) this year as the Kingdom seeks to expand home ownership.

Fabrice Susini, the CEO of Saudi Real Estate Refinance Company (SRC), said that the company will tap domestic and international debt buyers with Islamic bonds. The refinance firm aims to fund around 80 per cent of its assets with debt or loans, Susini said.

For years, the absence of financing firms like SRC limited the ability of banks to expand their mortgage books amid central-bank limits on loans to any one sector.

The refinancing firm, which started in end of 2017, has been operating for one year. It was started with SAR 5 billion in capital and has been working closely with the government’s Real Estate Development Fund.

The fund also provides interest-free loans to middle and low-income citizens through commercial banks.

The SRC plans to sell Sukuk domestically in the next two quarters and will tap international investors by the end of the year, the CEO said.

“We may look at a public offering rather than purely private placement,” Susini said. The plan then would be to issue around SAR 1 billion, which would be a decent size for a first international issuance.”

Some of the funds raised will be funnelled to commercial lenders to be given as mortgages to citizens complying with state-set criteria to help provide affordable housing to citizens often ignored by banks, the CEO said.

Majed Al-Hogail, Saudi Arabia’s Housing Minister, said that the refinancing firm expects to buy SAR 7 billion to SAR 10 billion in mortgage portfolios held by banks and mortgage providers this year.

 “The mortgage finance companies, up until the creation of SRC, were very much dependent on the banks in terms of refinancing, as we come with a new offer that is competitive, they will be more incentivised to work with us,” said Susini.

 

TAGS : Sukuk, Saudi Arabia SRC , Saudi Real Estate Refinance Company, mortgage, Vision 2030, MbS, Crown Prince Mohammed bin Salman

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