DUBAI- Government-owned Saudi Real Estate Refinance Co (SRC) has established a programme allowing it to issue up to 11 billion riyals ($2.9 billion) of local currency-denominated Islamic bonds, the company said on Thursday.

The company mandated HSBC Saudi Arabia as sole lead manager and bookrunner to arrange meetings with investors, and an initial, senior sukuk issue under the programme will follow, subject to market conditions, it said.

Founded in 2017 by the Public Investment Fund (PIF), SIC aims to accelerate housing construction - a sensitive social issue and a top objective of economic reforms - by injecting liquidity into the real estate market.

SRC has so far operated with financing from the PIF and short-term deals with banks, but may now become a major issuer in Saudi Arabia's domestic bond market. Increasing activity in that market is another goal of economic reforms.

The company's statement on Thursday did not reveal how large the initial sukuk issue would be, merely saying sukuk would be offered from time to time through multiple issuances.

In an interview with Reuters in August, SRC chief executive Fabrice Susini said the first public issue would probably be at least 300 million to 500 million riyals. 

The company has said it aims eventually to refinance 20 percent of Saudi Arabia's primary home loans market, which authorities hope to expand to 500 billion riyals by 2020 and 800 billion riyals by 2028 from 290 billion riyals now.

(Reporting by Andrew Torchia, editing by Louise Heavens) ((andrew.torchia@thomsonreuters.com; +9715 6681 7277; Reuters Messaging: andrew.torchia.thomsonreuters.com@reuters.net))