New mortgages to boost home ownership in Saudi Arabia

A new mortgage initiative is expected to give home ownership a boost in Saudi Arabia. (Shutterstock)
Updated 09 August 2018
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New mortgages to boost home ownership in Saudi Arabia

  • Buyers can tap long-term fixed borrowing
  • Offers protection against rising interest rates

DUBAI: Saudi citizens will be able to apply for cheaper and more accessible mortgages at fixed rates under an initiative launched Wednesday by the Saudi Real Estate Refinance Company (SRC), the body set up and backed by the Kingdom’s Public Investment Fund.
The SRC initiative will allow new or existing borrowers to access facilities to boost their mortgage potential, with at least seven big Saudi Arabian financial institutions taking part to provide new mortgages for home buyers.
Unveiling the scheme in Riyadh, Majed Bin Abdullah Al-Hogail, minister of housing and chairman of SRC, said that the launch of the new funding solution marks the official start of SRC’s strategic plan to help ‘unlock’ the Saudi housing finance market, by broadening and adapting the product offering and by increasing liquidity, thus enabling lenders to offer more accessible home buying options to citizens.
“The importance of this step is stressed when we realize that very few homes are owned through mortgage in Saudi Arabia. This step by SRC, as part of enabling the mortgage finance sector, will allow financial institutions to provide financing solutions of 15 to 20-year fixed rate mortgages to start with,” he added.
SRC has signed deals with Deutsche Gulf Finance, Bidaya Home Finance, Amlak International, Saudi Home Loans, National Commercial Bank, Dar Al Tamleek, and SABB to act as “customer touchpoints” for the new scheme, and other financial institutions are expected to join the network in due course.
The new mortgage facilities will be shariah-compliant, and will help reduce the risk to borrowers exposure to rising global interest rates. US rates are forecast to rise over the next year, with implications for borrowing in dollar-pegged currencies like the Saudi riyal.
“SRC will make a large amount of funding available to the financial institutions we partner with to provide more options of financing. We worked closely with the Ministry of Housing, Ministry of Finance and the Saudi Arabian Monetary Agency who planned this step and worked hard with us to make it happen,” Fabrice Susini, chef executive of SRC told Arab News.
He declined to say how much funding SRC would make available, explaining that it depended on the demand in the market
“Our objective is to enable these firms to improve the availability of mortgage financing for Saudis, while at the same time introducing long-term fixed rate mortgages into the market as a standard and widely available product for the first time,” Susini said.
Fixed rate long term mortgages have been available in the Kingdom for some time, since the first laws allowing mortgages were passed in 2012. But they are not as widely taken up as in other parts of the world.
“Our role is to make it possible for the ‘average’ Saudi to obtain financing so they can own a home and build equity. We know that many aspiring homeowners look for certainty with their mortgage payments over the longer term.
“The new long-term fixed-rate mortgages meet this need by providing a high degree of predictability and protection from potential interest rate increases. This will give customers the good feeling of having ‘future-proofed’ their mortgage payments, which gives them peace of mind when it comes to their monthly expenses,” Susini said.
Al-Hogail said: “This plan will have a high impact on our goal to increase homeownership to 60 percent by 2020 and 70 percent by 2030, as per the Housing Vision Realization Program.”
Earlier this year the government announced a SR120 billion housing program with the aim of increasing national levels of home ownership.
Real estate industry experts welcomed the move.
David O’Hara, head of property consultants Cluttons’ Saudi Arabia office, said: “Any change to make mortgages more accessible is a good thing for business in general. There is a the ripple effect from home ownership across the economy. Currently entry prices are high and are preventing people from setting up home where they would like to live.”


Saudi Aramco to invest in refinery-petrochemical project in east China

Updated 22 min 34 sec ago
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Saudi Aramco to invest in refinery-petrochemical project in east China

  • This is the third such project in China that Saudi Aramco has set its sight on
  • Last month, Saudi Aramco signed a long-term deal with the Zhejiang project’s operator Zhejiang Rongsheng to supply crude oil

ZHOUSHAN, China/SINGAPORE: State oil giant Saudi Aramco signed an agreement on Thursday to invest in a refinery-petrochemical project in eastern China, part of its strategy to expand in downstream operations globally.
The memorandum of understanding between the company and Zhejiang province included plans to invest in a new refinery and co-operate in crude oil supply, storage and trading, according to details released by the Zhoushan government after a signing ceremony in the city south of Shanghai.
Zhejiang Petrochemical, 51 percent owned by textile giant Zhejiang Rongsheng Holding Group, is building a 400,000-barrels-per-day refinery and associated petrochemical facilities that was expected to start operations by the end of this year.
This is the third such project in China that Saudi Aramco has set its sight on as it seeks to lock in long-term outlets for its crude oil and produce fuel and petrochemicals to meet rising demand in Asia and cushion the risk of a slowdown in oil consumption.
Last month, Saudi Aramco signed a long-term deal with the Zhejiang project’s operator Zhejiang Rongsheng to supply crude oil.
The oil giant had not yet finalized the size of its stake in the project and still needed to complete due diligence, Aramco’s Senior Vice President of Downstream, Abdulaziz Al-Judaimi, said on the sidelines of the event.
Saudi Aramco expects to supply 170,000 barrels per day of Saudi crude to the refinery in Zhoushan when it starts operations, he said.
The first crude carrier supplying the refinery should arrive in December or January, depending on when the project starts, he added.
Aramco also owns part of the Fujian refinery-petrochemical plant with Sinopec and Exxon Mobil Corp, and has plans to build a 300,000-bpd refinery with China’s Norinco. It is also in talks with PetroChina to invest in a refinery in Yunnan.