The Islamic Corporation for the Development of the Private Sector (ICD),
the private sector funding arm of the Islamic Development Bank (IDB) Group, for
instance has devised a unique three-pronged strategy which involves the
establishment of a Shariah-compliant real estate development company, a real
estate development finance company and a mortgage finance company.
The first, Ewan Global Residential Real Estate Company, whose
shareholders include ICD, the Saudi Public Pension Fund and Saudi Economic
Development Company (Sedco), is already operating. The second, Anfaal Capital,
recently got an investment management licence from the Capital Markets
Authority (CMA) in Saudi Arabia.
Anfaal’s mandate comprises three core areas — to finance the development
of real estate and affordable housing projects, initially in the Kingdom and
later in other countries; to finance small-and-medium-sized enterprises (SMEs)
in the Kingdom and beyond; and to act as an investment bridge between Saudi
Arabia and southeast Asia especially Malaysia, Indonesia and beyond.
Not surprisingly, its shareholders are equally diverse including ICD (37
percent of the equity); Malaysia’s Maybank Investment Bank (18 percent) which
will also provide the technical support; Ewan Global Residential Real Estate
Company (18 percent) and Sedco (18 percent) and International Islamic Bank
(IIB) Bahrain (9 percent).
The third, the mortgage finance company, is under establishment. ICD
established a mortgage advisory company with Capitas of the US, but is now in
the process of establishing a dedicated Islamic mortgage finance company with
the Saudi Public Investment Fund and Capitas which will be capitalised at SR2
billion.
Khaled Al-Aboodi, the CEO of ICD, has been keen for the corporation to
contribute to the real estate sector in the Kingdom, partly to leverage the
huge demand for affordable housing due to the dearth of housing units and
partly to capitalize on an attractive investment opportunity which shows
potentially good returns.
“The ICD mandate is to support the economic development of its member
countries through the provision of finance to private sector projects on a
Shariah-compliant basis. In fact, we have four good opportunities in the
pipeline which could result in SR3 billion worth of business, if they take
off,” explained Al-Aboodi, who is also chairman of Anfaal Capital.
The three-pronged strategy attracted the support of the Public Pension
Fund, the Public Investment Fund and Sedco, the private family investment
office of the Bin Mahfouz Family.
According to Mohammad Abdullah Fadaili, CEO of Anfaal Capital, the
company’s initial core business will be to finance real estate and housing developments,
SMEs and to structure mortgage products based on diminishing Musharaka and
Ijara for the mortgage finance company.
“We received an investment management licence from the CMA on Sept. 1,
2010. We have a capital of SR60 million, but we plan to seek an increase at the
company’s next general assembly. We have a good pipeline of projects and the
ICD is also channelling a number of strong projects to us. We will be using the
strength of our shareholders to capitalize on our business activities. Our competitors
are very busy with their everyday business,” Fadaili explained to Arab News.
The Saudi mortgage law could not be coming at a more pressing time.
According to Anfaal Capital, there is a current demand for almost 1 million
housing units in Saudi Arabia alone. This is projected to increase on a yearly
basis by 150,000 units. These units are for sale and not for the rental market,
which has enough capacity. The problem is that rentals in the Kingdom are very
high and this has helped fuel inflation in the country.
Fadaili is excited about the projects for affordable housing in the
Kingdom, where demand is fuelled by internal dynamics as opposed to the housing
bubble in Dubai which was fuelled by foreigners buying second homes for
investment and rental purposes.
He sees the involvement of Maybank in Anfaal Capital as key in bridging
the gap between the GCC countries and southeast Asia especially for channelling
direct investment from Saudi Arabia into the region in economically productive
investments such as affordable housing and SMEs with decent returns. At the
same time, there are also good opportunities for Malaysian and regional
investors to enter the Saudi market to diversify their risks and get above
average returns.
In August 2010, the Saudi Arabian government approved the country’s 9th
Five-Year Development Plan (2010 — 2014) totaling SR1.44 trillion inter alia to
develop human resource and education, housing and transportation
infrastructure. In addition, the Saudi Arabia General Investment Authority
(SAGIA) is developing six economic cities, which its estimates would have a
population of 45 million by 2020, which would generate huge additional demand
for housing and other services.
