Saudi Real Estate Refinance Company’s (SRC) CEO Fabrice Susini said that the company will tap international debt markets for a $500 million dollar-denominated bonds early next year, to support the development of its loan book.
The company is established to help the domestic home loan industry and it is now intended to tap the local Sukuk market with a one-year guaranteed bond issue programme of $2.7 billion (10 billion riyals) before its international foray, said the company CEO in a statement.
“We will target around $500m for the first international issuance, probably not below. It could be a bit more. We’ll see. It will depend … on the situation in the market at that time,” Mr. Susini said.
SRC also aims to enter next year’s structured finance market, either by securitizing some of its loan book or by issuing a covered bond as the firm tries to diversify its sources of financing.
SRC was co-founded in October 2017 to raise homeownership in the largest Arab economy by the Kingdom’s Public Investment Fund (PIF) and the Ministry of Housing. 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 area.
“Mortgage take-up rates were low by international standards when the company was formed, with only about 150,000-170,000 issued for a country with more than 30 million inhabitants. SRC “probably underestimated” the amount of time it would take for its product to become established among banks and mortgage lenders, but since the second half of last year, the market has witnessed exponential growth. SRC’s balance sheet reflects the surge by the end of October, multiplying more than three times our total balance sheet deployment. The deal showed that there are “more players” in the kingdom that have originated mortgages outside of the 11 main banks”
PIF offered initial financing of $1 billion (5 billion riyals), but the company has already tapped local Sukuk markets on a few occasions following the issue of its Islamic bond debut of $220 million (750 million riyals) in March last year.
He further cited that the Saudi Central Bank’s mortgage lending figures showed that the size of the kingdom’s residential loan market grew by $25 billion (97 billion riyals) to about $83 billion (312 billion riyals) by the end of the third quarter of 2020.
“We are agnostic as to who is originating these mortgages, as long as it complies with the regulations … our objective is to facilitate the process for originators. But the big driver … the ultimate bearing we have in mind is the ultimate borrower, the Saudi citizen – making sure that they can get access to financing at the most competitive rate possible for a product that is best suited for their situation,” added Mr. Susini.