SRC signs $533.35m mortgage finance deal with Saudi Arabia's social insurance agency

SRC will refinance the portfolio of a housing programme backed by the General Organisation for Social Insurance

A housing project in Riyadh. Saudi Arabia is trying to boost affordable housing in the kingdom. Bloomberg

The Saudi Real Estate Refinance Company (SRC), a mortgage financier backed by the kingdom’s sovereign investment arm the Public Investment Fund, reached a refinancing deal with the General Organisation for Social Insurance of Saudi Arabia (Gosi) worth 2 billion riyals ($533.35 million).

Under the deal, SRC will refinance the Gosi-backed portfolio of housing called Masakin, it said in a statement.

The latest agreement is the third such transaction between SRC and Gosi, pushing the total value of deals agreed so far to 5bn riyals. It aims to boost liquidity for the Saudi home financing market to facilitate mortgages for Saudi families under the Masakin programme, which Gosi launched in 2007.

The deal is in line with the kingdom’s objectives of the housing programme, which is one of the central planks of Vision 2030. That set a target of increasing home ownership in the kingdom to 70 per cent before the end of this decade.

“We are … an integral part of the housing ecosystem in the kingdom. Our crucial role has enabled us to partner with SRC once again, where we create synergies to realise the Vision 2030 housing programme objectives,” Mohammed Al Nahhas, Governor of Gosi, said. “This agreement will help … facilitate affordable housing in the kingdom.”

In July last year, SRC signed an agreement with the Public Pension Agency to acquire a mortgage portfolio worth more than 3bn riyals, the biggest housing refinancing deal in the kingdom. The agreement represented a significant portion of the Masakin that provides fixed-rate Murabaha home loans to employees and pensioners from the agency and Gosi to encourage home ownership in the kingdom.

SRC was founded in 2017 by Saudi Arabia's sovereign wealth fund, the Public Investment Fund, to help increase home ownership among Saudi nationals and develop the mortgage finance market in the kingdom. 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.

“This transaction demonstrates that SRC’s refinancing model for the Saudi housing market works and we will continue to collaborate with strategic partners to provide greater liquidity and risk management solutions in this market,” Fabrice Susini, chief executive at SRC, said.

“Our work with organisations such as Gosi makes home financing even more accessible and affordable to citizens while providing additional dynamism to the kingdom’s robust home financing.”

In March this year, SRC raised 4bn riyals through the issuance of a dual tenor sukuk or Islamic bonds.

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 10bn riyals sukuk programme under which its will issue sovereign-guaranteed sukuk targeting local investors.