Beirut: Saudi Arabia’s sovereign wealth fund is setting up a mortgage refinancing company as it deepens the role it plays in the Arab world’s biggest economy.
Saudi Real Estate Refinance aims to refinance 75 billion riyals (Dh73.4 billion, $20 billion) in mortgages in five years and more than double that by 2026, the Public Investment Fund said in an emailed statement. The company plans to acquire mortgage portfolios, issue mortgage-backed securities and offer direct and indirect refinancing as it seeks to boost home ownership, it said.
“The new company is designed to stimulate housing sector development in the kingdom by injecting liquidity in the real estate market,” the statement said.
The Public Investment Fund, established in 1971, is rapidly expanding its presence in all areas of the Saudi economy. Just this month, it announced a $500 million energy efficiency company, built a $2.4 billion stake in Almarai Co, a Riyadh-based dairy farm operator and food processor, and established a $1.1 billion fund to support small- and medium-sized enterprises.
Dependency on oil
Saudi Crown Prince Mohammad Bin Salman wants to make the wealth fund the largest in the world, with an estimated $2 trillion in spending power, as part of his plans to reduce the country’s decades-long dependency on oil. The fund will use the proceeds from the sale of a stake in oil giant Saudi Arabian Oil Co, which is said to be facing possible delay, to invest in projects at home and abroad.
The fund “appears to have been mandated to lead the charge towards reducing the country’s reliance on oil,” Aqib Mehboob, a senior analyst at Saudi Fransi Capital, said in response to emailed questions. “In almost every high-priority project, PIF has been mandated a key role,” he said using the fund’s acronym.
In September, the wealth fund said it will spearhead a $4.8 billion project to redevelop the Jeddah waterfront on the Red Sea. It also committed $20 billion to an infrastructure investment fund with Blackstone Group LP, the world’s biggest private-equity manager.
Saudi Housing Minister Majed Al Hoqail will head the board of the new mortgage refinancing company. Demand for real estate financing in Saudi Arabia is expected to increase from $74.6 billion riyals in 2017 to $133.3 billion in 2026, the fund said in statement.
