Saudi Real Estate Refinance Co to obtain sovereign guarantees on sukuk

Saudi Real Estate Refinance Company (SRC), wholly owned by the Public investment fund (PIF), on Tuesday, said that the Ministry of Finance will provide guarantee for its future sukuk issuances.

The credit support agreement was signed between Mohammed Al-Jadaan, Minister of Finance and Majid Al-Hogail, the Housing Minister, who is also the chairman of SRC.

The Ministry of Finance guarantee will reduce the cost of funds for SRC, enabling it to attract foreign and local investors across capital markets, the company said in a statement.

The agreement also acts as a catalyst for SRC to provide liquidity to banks and mortgage finance companies in the Kingdom, with a target of refinancing at least 10 percent of the mortgage market by 2020, and 20 percent by 2028.

“The guarantee provided by the Ministry of Finance for our future sukuk issuances will help SRC accelerate its purpose of developing a robust secondary mortgage market in the Kingdom by providing liquidity and capital relief to lenders. This in turn will help the financial institutions to offer attractive mortgage solutions to aspiring home owners in Saudi Arabia," said Fabrice Susini, CEO of SRC.

The announcement follows SRC’s sukuk issuance of SAR 750 million, making it the first non-sovereign issuer in Saudi Arabia in 2019 under its SAR11 billion sukuk program established last December.  

As part of the sukuk program, the company expects to tap the market with multiple issuances this year, the statement added.