RIYADH: The Saudi Real Estate Refinance Company (SRC) has informed SR4 billion ($1.07 billion) in long-term Sukuk issuances, giving liquidity to the Kingdom’s real estate market.
The real estate finance company, owned by the Public Investment Fund (PIF), recently launched an SR10 billion Sukuk program aiming at local investors.
The latest issuance was given in seven- and 10-year periods and was part of a private offering to Saudi-based institutional investors.
“The successful Sukuk issuance demonstrates confidence among the investor community and trust in a robust housing market in the Kingdom and more broadly a resilient Saudi economy,” Majed Al-Hogail, the minister of housing and chairman of the SRC, said in a statement.
Al-Hogail provided that the Sukuk program will help the Kingdom get its real estate goals under Vision 2030, where home loans are more affordable and accessible to Saudi citizens.
“The latest sovereign-guaranteed offering, underpinned by the favorable cost of funding and terms, will further provide liquidity to the Saudi housing market that helps our citizens climb the housing ladder,” he said.
“This issuance will also contribute to the realization of the Public Investment Fund’s strategy, a key driver in promoting the growth of the Saudi economy and diversifying sources of income by launching new sectors, including a secondary market for real estate financing,” Al-Hogail added.
The minister noted a solid investor interest in the SRC issuance, charming an order book in excess of SR8 billion, which shows an oversubscription of 2.15 times. This also shows SRC’s “growing presence and importance as a catalyst” in the Saudi real estate sector, HSBC Saudi Arabia’s Faisal Qadri said.
The SRC was established by the PIF in the year 2017, to support system of the Saudi Arabia real estate market by acting as a catalyst for accessible and affordable home financing solutions. At the point when it was launched, it set an objective of 10% of all-out private home loan advances before the end of 2020 and 20 percent throughout the coming few years.
In Saudi Arabia’s Vision 2030 plan, the government is focusing to raise homeownership in the Kingdom to 70 percent, up from 45 percent in 2017.
As per the Saudi Central Bank (SAMA), the complete number of new private home loan credits approved in the Kingdom in January 2021 grew 35 percent year-on-year.
The total cost of home loans gushing 60 percent year-on-year to SR16.4 billion in the initial month of 2021, SAMA said. As per the report by the US-Saudi Business Council (USSBC), the count of new residential home loans for individuals in 2020 summed up to SR136.2 billion, an 83 percent year-on-year rise.
The report likewise tracked down that the number of families moving into homes through the Ministry of Housing’s Sakani moderate housing program grew 27% year-on-year to 138,300.
“The three main factors that will drive demand for housing are concentrated on a growing young population, rising income per capita, and the downsizing of the Saudi average household size,” Albara’a Alwazir, an economist at USSBC, said in the report.
“The evolution of these three factors will lead to the need for additional affordable housing options to meet pent-up demand. To reduce the supply and demand imbalance, the Kingdom will need to construct an additional 1.2 million homes over the next 10 years to reach a total housing stock of 4.96 million units by 2030. Demand will approximately grow from 99,600 units in 2021 to 153,000 units by 2030 with an average of 124,000 units over the next 10 years,” he added.
