RIYADH: Saudi Arabia’s residential real estate financing secondary market has received 50 billion riyals ($13 billion) in funding from a company tasked with transforming the sector, Arab News reported.
Established in 2017 and wholly owned by the Public Investment Fund, Saudi Real Estate Refinance Company SRC aims to provide market liquidity and capital and risk management solutions to the housing finance market.
To support Saudi Vision 2030 goal of achieving 70% home ownership rate, the government has created a unique model to ensure the establishment of the necessary infrastructure across the value chain of the secondary housing finance market, and chose to create a new mortgage aggregator and refinancing agency. .
SRC’s strategy of funding originators and financiers rather than individual buyers is critical to solidifying its role in the Saudi real estate landscape.
This approach has amplified liquidity in the real estate secondary finance market, ensuring originators and financiers have access to the capital they need.
According to information provided by SRC to Arab News, “As a result of[the company’s]efforts, the value of the refinanced real estate portfolio and the liquidity provided to the real estate finance market exceeded 50 billion riyals, and banks and financial institutions The liquidity we provide to the financial market has made it possible to provide real estate financing solutions to the public at a fair cost, in order to achieve further stability and development in this important market. ”
According to the company, prior to the launch of the SRC, home refinancing in Saudi Arabia was typically transactional, with banks selectively purchasing portfolios to support housing finance exposures or to take advantage of market timing.
In 2018, the country began to witness a paradigm shift with the introduction of standardized refinancing solutions that are independent of lenders’ current demands.
Over the next two years, the company completed 30 real estate refinancing transactions in support of nine housing finance institutions, amounting to more than 5.6 billion riyals.
From 2021 to 2023, with the aim of further supporting the secondary market for residential real estate, we completed 54 real estate refinancing transactions with 16 residential real estate financial institutions, with a total refinancing business amounting to SR29 billion.
Therefore, the refinancing amount resulting from the company’s purchase of the portfolio exceeded SR 35 billion, in addition to a short-term credit facility of approximately SR 15 billion for real estate financiers for the purpose of new origination.
SRC says this transition is aimed at providing stability, longevity and innovation to the housing finance market, and that all He said it provides an essential solution for originators.
Fabrice Susini, CEO of the company, told Arab News that the company aims to leverage its capabilities and expertise to become the preferred partner for real estate financiers in the Kingdom.
“We aim to enable more citizens to benefit from financing solutions. In line with the goals of Saudi Vision 2030, we aim to provide flexible residential real estate that suits their wishes. This will help improve home ownership rates in Saudi Arabia,” he said.
Therefore, refinancing in the housing finance sector is currently carried out based on two models.
The first is to reduce financing risks and capacity constraints through credit, hedging, capital and balance sheet solutions.
The second is to provide financing solutions to improve access to capacity and liquidity while maintaining the risks inherent in financing arrangements.
To do so, the company sought to inject more liquidity into the market through a sukuk program offered to accredited investors.
The company secured its continued status as an authorized issuer by doubling the total amount of its Saudi riyal-denominated sukuk program from SR10 billion to SR20 billion.
SRC’s commitment to the growth of the financial sector in Saudi Arabia is unwavering. SRC aims to attract diverse domestic and international investors through continuous Sukuk issuance.
This initiative not only promises market liquidity, but also stabilization of the real estate financial market and increased home ownership.
SRC’s domestic sukuk program supports the strategic objectives of Vision 2030’s financial sector development program and housing program.
SRC embraces Islamic finance, raising funds through Islamic law-compliant Saudi investors and local sukuk issuance, and aims to expand this strategy internationally.
The company issued Sukuk worth SAR 750 million through multiple tranches in 2018 and 2019.
This was followed by the launch of a local sukuk program in March 2021, backed by government guarantees worth SR10 billion, providing SR4 billion in two tranches with maturities of 7 and 10 years.
In December 2021, the company made available the third tranche of the program worth SR2 billion, which was fully completed in early 2022 with the issuance of the fourth tranche worth SR4 billion.
In 2022, SRC announced that it will double its Saudi riyal municipal bond program and complete the offering of the fifth tranche by issuing municipal bonds worth 3 billion Saudi riyals.
The company completed the offering of the sixth tranche worth SAR 3.5 billion in May 2023, followed by the offering of two tranches worth SAR 3.5 billion in November, completing a total program of SAR 20 billion. .
The company aims to further diversify its funding sources by offering dollar-denominated bonds in global markets to help attract foreign investment.
Additionally, we aim to securitize the portfolio through the provision of mortgage-backed securities to ensure investment flows and ensure liquidity to support the growth of the Kingdom’s real estate finance sector.
Majeed Fahd Arabd al-Jabbar, deputy CEO of SRC, told Arab News: Continue to develop the real estate finance market, provide liquidity, and support the Saudi government’s efforts to achieve further increases in home ownership rates for Saudi families. ”
SRC plays a role in securing new sources of financing in the residential real estate market by promoting market liquidity and providing capital and risk management solutions to originators and lenders, making it easier for borrowers to access housing finance. We will support you to do so.