A new tripartite agreement was signed yesterday under the patronage of Minister of Municipal and Rural Affairs, Majid Al-Hogail, in a bid to boost Saudi Arabia’s real estate sector. The Real Estate Development Fund (REDF), Saudi Real Estate Refinance Co. (SRC), and Al-Ahli Bank signed a memorandum of understanding, a major step taken by the Kingdom in boosting its housing finance efforts.

The collaboration aims at enhancing the housing sector in the country and promoting a growing secondary mortgage market. It is an agreement between SRC, which is wholly owned by Public Investment Fund, and Al-Ahli Bank, among the key players in the Kingdom’s finance industry. Under the agreement, Al-Ahli Bank will originate mortgage portfolios, which SRC will later refinance. Mortgage-backed securities (MBS) will also be accelerated, and the experience may be shared with the domestic and foreign markets.

The new partnership would promote the housing program in Saudi Arabia by moving toward an integrated and sustainable system of financing in real estate. Moreover, it would increase options for housing among Saudi citizens, more in line with the greater objectives of Saudi Vision 2030.

According to the latest statistics of the Saudi Central Bank, residential mortgage disbursements in the first nine months of 2024 reached SR60.92 billion, or $16.24 billion, up by 4.88% compared to the same period of 2023.

Out of this total, SR38.85 billion was allocated for home purchases, which reflected 64% of the overall loans. While the share of home purchase loans has declined to 69% from 2023, apartment demand has skyrocketed to 31% of all mortgages, up from 25% last year. Apartment purchase lending increased by 26.8% to SR18.6 billion. In addition, land purchase loans increased by 8.26%, which further demonstrates that interest in land investment is sustained.

The partnership between REDF, SRC, and Al-Ahli Bank aims at enhancing market liquidity to guarantee that there is a steady mortgage financing flow, thus propelling the growth of the secondary mortgage market. While signing the agreement, Al-Hogail presented an offer from Al-Ahli Bank, where customers purchasing under-construction units could enjoy interest rates beginning from 2.59%.

Mansour bin Madi, Real Estate Development Fund CEO explained that the partnership will aid in lowering financing costs of Saudi families in accordance with “Sakani” objectives. Majeed Al-Abduljabbar, SRC CEO considers the partnership vital to forward the Kingdom’s mortgage market, whereas Tareq Al-Sadhan, CEO of Al-Ahli Bank expressed the bank’s commitment to contributing towards development of a dynamic mortgage sector.