Mortgage refinance company, Saudi Real Estate Refinance Co. (SRC), has completed issuing a 2 billion riyals ($533.3 million), sukuk or Islamic bond, to support lenders in the housing market.

The 10-year sukuk, which is sovereign guaranteed, was issued at a fixed profit rate of 3.04 percent and marketed to Saudi institutional investors. It was oversubscribed 2.5 times, the mortgage company, which is wholly owned by Saudi Arabia's sovereign wealth fund, Public Investment Fund, said in a statement on Sunday.

New funding raised will enable mortgage originators to provide lower mortgage rates and support the housing market, making borrowing more accessible to buyers, SRC said.

The issuance is part of the 10 billion riyals sukuk programme SRC set up earlier this year, under which it will issue sovereign-guaranteed instruments targeting local investors. Its first offerings under the programme were issued in March 2021 in two tranches of 7 and 10-years totaling 4 billion riyals.

Rather than lend directly to homeowners, SRC buys and guarantees home financing portfolio from local banks and non-bank lenders.

Mortgage lending by Saudi Arabia's banks has surged in recent months driven by the government's plans to boost home ownership to 70 percent under the Saudi Arabia's Vision 2030, the roadmap that aims to diversify its economy.

"The funding raised will enable us to expand our relationships with home finance lenders, as Saudi Arabia moves closer to its target of achieving 70 percent home ownership among Saudi nationals by 2030,” SRC's Chief Executive Fabrice Susini said in the statement.

The lead coordinator for the transaction was HSBC Saudi Arabia and the joint lead managers were AlJazira Capital, Al Rajhi Capital, Riyad Capital, Saudi Fransi Capital, and SNB Capital.

(Reporting by Brinda Darasha; editing by Daniel Luiz) 

brinda.darasha@refinitiv.com

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