PIF-backed Saudi Real Estate Refinance signs mortgage finance deal worth $266m

SRC will refinance the real estate portfolio of Saudi National Bank as per the agreement

The deal is expected to provide long-term liquidity to the kingdom’s home finance market. Reuters

The Saudi Real Estate Refinance Company (SRC), a mortgage financier backed by the kingdom’s Public Investment Fund, has reached a refinancing deal worth 1 billion Saudi riyals ($266.6 million) with Saudi National Bank as it seeks to boost the home finance market in the Arab world’s biggest economy.

This is considered to be the largest bank refinancing deal in the kingdom to date, the SRC said in a statement on Sunday.

The agreement aims to refinance the lender’s real estate portfolio to provide long-term liquidity to the kingdom’s home finance market, SRC said.

SRC continues to “expand its partnerships with originators to boost the rate of Saudi home ownership to 70 per cent by 2030”, Fabrice Susini, chief executive of SRC, said.

Saudi Arabia has set an ambitious target of raising home ownership rates in the kingdom to 70 per cent by 2030 under the Sakani programme — a joint initiative between the Ministry of Housing and the Real Estate Development Fund.

The fund distributes land plots and arranges home loans for Saudi citizens seeking to build homes.

The liquidity generated through the partnership with SRC will enable SNB to provide housing finance solutions that fulfil the needs and requirements of families in Saudi Arabia, Majed Al Ghamdi, the bank’s chief executive of retail, said.

The home financing sector in Saudi Arabia has witnessed significant growth in recent years, with 300,000 mortgage deals worth 140bn Saudi riyals recorded in 2020.

More than 260,000 contracts worth more than 150bn riyals were registered last year, the SRC said.

The company was cofounded by the kingdom’s PIF and the Ministry of Housing in October 2017 to boost home ownership in Saudi Arabia.

It does not lend directly to end users, but provides liquidity to the home loans market by buying mortgages from banks and other lenders, freeing them up to extend more loans to the sector.

The SRC raised 4bn riyals through the issuance of a dual tenor sukuk or Islamic bonds in March last year.

The issuances, a private offering to Saudi-based institutional investors, attracted an order book in excess of 8bn riyals, the company said at the time.

The deal was part of SRC’s 10bn riyals sukuk programme under which it issued sovereign-guaranteed sukuk, targeting local investors.