BlackRock partners with Saudi Arabia to develop kingdom’s property finance market

The deal will focus on diversifying funding sources amid Vision 2030 initiative

Saudi Arabia is developing new real estate projects as it aims to diversify its economy away from oil. AFP

The Saudi Real Estate Refinance Company (SRC), a mortgage financier backed by the kingdom’s Public Investment Fund, signed an initial agreement with the US-based BlackRock to develop the country’s property finance market and achieve the goals of the Vision 2030 programme.

As part of the deal signed in New York City, the two companies will focus on boosting the development of programmes in the real estate refinance in the kingdom and expand through local and international capital market channels, the Saudi Press Agency reported on Saturday.

They will also seek to diversify funding sources through the fixed income market to increase “the stability of the real estate finance market” in the kingdom.

“We look forward to partnering with the Saudi Real Estate Refinance Company to advance mortgage securitisation and other capital markets solutions,” a BlackRock representative told The National.

“SRC and BlackRock share the objective of enabling and unlocking institutional capital in this growing, high quality fixed income asset class.”

The new deal comes after BlackRock announced a partnership with PIF in April to open a multi-class investment firm in Riyadh, anchored by an initial investment mandate of up to $5 billion from the Saudi wealth fund, to drive further growth of the kingdom's capital markets and attract more investment.

“Saudi Arabia has become an increasingly attractive destination for international investment as Vision 2030 comes to life, and we are pleased to offer investors from around the world the opportunity to take part in this exciting, long-term opportunity,” Larry Fink, chairman and chief executive of BlackRock, said at the time.

Saudi Arabia continues to develop several sectors in the kingdom as part of the Vision 2030 initiative to diversify its economy away from oil.

As part of the strategy, the kingdom is building new real estate projects including the futuristic mega-city Neom with an investment worth $500 billion.

Saudi Arabia has also set a 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 citizens seeking to build homes.

In the first half of this year, 55,000 Saudi families have benefited from the programme, including 44,000 who moved into their first homes, SPA reported this month.

Last week, SRC also signed another agreement with New York-based King Street Capital Management to boost co-operation between the two in the real estate finance sector.

The agreement aims to diversify liquidity sources to support the “secondary real estate finance market's stability, foster economic growth, and attract more foreign investments to the Saudi market,” SRC said.

SRC was established in 2017 with the purpose of developing the housing finance market in the kingdom. It offers funding to lenders including banks and finance companies to help them provide home loans for homebuyers. It has also has a licence from the Saudi Central Bank to operate in the field of real estate refinancing.

The PIF is the central plank of the kingdom’s Vision 2030 programme, which aims to cut its dependence on oil. The PIF, along with its related organisations, is driving investment into key areas including finance, health care, sport, renewables, technology, the automotive industry, property, aerospace, defence, entertainment, leisure, retail and mining.

Last week, the PIF said its assets under management jumped 29 per cent to 2.87 trillion Saudi riyals ($765 billion) in 2023 as it continues to build its Saudi holdings and diversify its international portfolio of assets.