Tuesday, Sep 25, 2012
RIYADH (Zawya Dow Jones)--Saudi Arabian investment bank Sidra Capital expects to have a housing mortgage firm operating in the kingdom by 2013, targeting families interested in more affordable housing outlying the kingdom's cities, Sidra's chief executive said on Tuesday.
Saudi Arabia's Public Investment Fund is taking a 15% stake in the mortgage company, Hani Baothman said. With 1 billion Saudi riyals ($267 million) in capital, the project is slated to be one of the first new mortgage firms to launch after the kingdom's approval this summer of its first comprehensive mortgage legislation. Canada Mortgage and Housing Corp. will serve as technical partner, Mr. Baothman said.
"We're going to be heavily involved in the beginning" of the opening of the mortgage market under the new laws, Mr. Baothman said. That way, "you can be involved in the crme de la crme."
The Saudi central bank is expected to release the completed mortgage legislation this autumn, after its approval by the Council of Ministers in early July.
Mortgage debt currently is equal to less than 5% of gross-domestic product in the kingdom, compared to 75% in the United States in the late 2000s. High land prices and a lack of financing and affordable homes for middle-income families mean only about one in four Saudis own their homes, according to analysts.
Market experts have predicted that lenders overall will be cautious initially in mortgage lending in Saudi Arabia, waiting to see if authorities will be willing to carry out the potentially unpopular step of evicting families that default on their loans.
Mr. Baothman predicted the maturation of the credit-rating system in the kingdom would lead to a generally low default rate.
The mortgage firm's target lending would be SAR800,000 to SAR1.5 million, he said. With more than 70% of land within Riyadh currently undeveloped, untaxed and generally priced too high for ordinary Saudis, he expected to focus on housing circling the kingdom's major cities.
"There will be a movement of lending from (privately owned land) in the cities to outlying land," Mr. Baothman said.
Sidra is partly owned by Kuwait's Aayan Leasing and Investment Co.
Write to Ellen Knickmeyer at ellen.knickmeyer@dowjones.com
Copyright (c) 2012 Dow Jones & Co.
(END) Dow Jones Newswires
25-09-12 1246GMT
