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Saudi Arabia plans SR2b housing finance company

The Arab National Bank owns 40 per cent of the company's capital.

The consortium has received preliminary approval from the Saudi Arabian Monetary Agency (SAMA).

A statement issued by the Arab National Bank and available on the web site of the Capital Market Authority, said that this partnership aims at bolstering the housing financing industry in the Kingdom and benefiting from the opportunities provided by the Saudi economy especially in the field of housing investment.

The signatories were Abdullatif Al Shelash, Managing Director of Dar Al Arkan, Jamal Al Jashi, Corporate Finance Manager at ANB, Walid Al Murshid, Business Manager of IFC, and Hadlool bin Saleh Al Hadlool, General Manager of Kingdom Installment Company (KIC).

"The new company is the result of efforts made by Dar Al Arkan during the past nine years in order to help Saudi youth purchase suitable houses by providing them with Shariah-compliant financial tools," Al Shelash said.

"People will be able to buy houses on an installment basis by paying amounts equal to monthly house rents," he added.

He described the formation of the company as a qualitative development in the Kingdom's housing sector. "This will also encourage real estate developers to establish more such firms," he added.

Dr Robert Eid, managing director and CEO of ANB, emphasised the significance of the new company, given the growing demand for housing all over the Kingdom as a result of increasing population and economic activities.

"This alliance is an important part of ANB's strategy to develop housing finance as a core growth sector for the bank and to develop and provide Shariah-compliant financial solutions to the bank's clients in relation to home finance," he said.

Al Murshid, who is also in charge of IFC's regional investment for the Middle East and North Africa, said the participation of the corporation in the agreement was aimed at promoting housing finance in developing markets to tackle housing problems.

He added that 80 per cent of the Kingdom's population is unable to purchase their own houses and so he expects the Saudi government would soon issue a real estate mortgage law to meet market needs.

Al Hadlool emphasised the new company's viability.

He said KIC is already well established as the largest private housing finance company in Saudi Arabia and as a pioneer of Shariah-compliant housing finance in the Kingdom, having financed more than 3,000 home purchases since its establishment as an offshoot of Dar Al Arkan.

He said that the new company would provide housing loans for up to 25 years at a comparatively lesser cost to purchase homes from any developer as long as they meet the technical conditions.

A recently completed research paper by Ernst &Young, Bahrain, noted that 'Saudi Arabia's real estate sector is witnessing unprecedented growth.'