Saudi wealth fund PIF launches real estate refinancing company

Saudi Arabia’s Public Investment Fund (PIF) has launched a real estate refinance company, aimed at injecting liquidity into the property market and raising the rate of home ownership among Saudis.

The sovereign wealth fund, believed to have about $180 billion of assets, has been charged with a growing array of responsibilities including leading urban development and industrial projects aimed at cutting the kingdom’s reliance on oil exports.

Increasing activity in the real estate market is one of the ways the government hopes to revitalize the economy after it slipped into recession during the second quarter, while it is also taking steps to reform the property sector as part of its Vision 2030 strategic plan.

Home ownership

Raising the real estate market’s contribution to the economy and growing the rate of home ownership among Saudis to 52 percent by the end of 2020, will be among the goals for the Saudi Real Estate Refinance Company, the PIF said in a statement on Thursday.

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Launched in partnership with the Ministry of Housing, the company is expected to refinance up to 75 billion riyals ($20 billion) for the housing sector over the next five years, reaching 170 billion by 2026, the PIF said.

That should go some way to helping meet total demand for real estate financing, which is anticipated to rise to 500 billion riyals in 2026, up from 280 billion in 2017.

Mortgage funds

The company will aim to inject liquidity into the secondary mortgage market by acquiring mortgage funds to help broaden the activities of property financing companies, while issuing bonds as securities, supported through mortgage contracts over the short and long term, to real estate financing firms.

It will seek to link investment from foreign and local investors in opportunities in the housing market, it said.

The kingdom has already sought partnerships with foreign players in the housing market, with housing minister Majed al-Hogail saying in May it was close to striking deals with South Korean and Chinese firms under a $100 billion project to build a million low-cost homes over the next five years.

In another move designed to boost foreign investment in the sector, the Capital Market Authority last year approved rules governing the listing of real estate investment trusts (REITs).