Saudi Real Estate Refinancing buys 3bn riyal mortgage portfolio from Public Pension Agency

The companies said the agreement covers a significant portion of the Masakin Programme, a PPA initiative to increase home ownership

General view of Riyadh city, after the Saudi government eased a curfew, following the outbreak of the coronavirus disease (COVID-19), in Riyadh, Saudi Arabia, May 7, 2020. REUTERS/Ahmed Yosri

The Saudi Real Estate Refinance Company (SRC) signed an agreement with the Public Pension Agency to acquire a mortgage portfolio worth more than 3 billion Saudi riyals (Dh2.9bn), the biggest ever housing refinancing deal in the kingdom.

The companies said that the agreement represents a significant portion of the Masakin Programme, an initiative by the PPA that provides fixed-rate Murabaha home loans to employees and pensioners from the agency and the General Organisation for Social Insurance (GOSI) to encourage home ownership in the kingdom.

The programme has so far helped to finance  more than 9,000 contracts in the last decade.

"This agreement will help the liquidity in the market and help us provide more mortgages to people to buy homes,” Mohammed Al Nahhas, governor of PPA, said.

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 has acquired a number of real estate portfolios from banks and other mortgage financing firms within the kingdom.

“The deal provides liquidity to the real estate financing market, which in turn is expected to bring lower prices and increase the number of mortgage originations – leading to SRC’s goal of improving homeownership rates in the kingdom,” Fabrice Susini, chief executive of SRC, said.

“The agreement provides the mortgage financing industry an opportunity to refinance their assets, that would otherwise be sitting in their books for a decade or two, by offloading mortgage portfolios to SRC. Such an avenue is expected to make the real estate financing market in the kingdom attractive to investors."

SRC said its goal is to deploy more than 20bn riyals, mainly through purchasing mortgage portfolios with an aim to refinance 10 per cent of home loans this year.

The kingdom’s mortgage market is expected to double in size within the next five years as the government pushes to increase home-ownership among its citizens, Fahad Alshathri, deputy governor for supervision at SAMA, said at a conference in Dubai last year.

Saudi Arabia, the Arab world's biggest economy, is aiming to increase home ownership to 60 per cent this year from 50 per cent in 2016 under a state-backed housing programme that encourages lenders and financing companies to allocate more funding to mortgage financing. The provision of housing is one of the key pillars of Vision 2030, the kingdom’s social and economic reform agenda.