$1.3bn of capital behind real estate financing company to help develop the kingdom's mortgage market
Saudi Arabia's central bank plans to launch a real estate refinancing company with 5 billion riyals ($1.3 billion) of capital to help develop the kingdom's mortgage market, local media quoted its governor as saying.
The company will be launched through the Saudi government's Public Investment Fund (PIF) or its subsidiaries, local daily Iqtissadeya cited Saudi Arabian Monetary Agency Governor Fahad al-Mubarak as saying.
The PIF was established in 1971 to provide financing support to important development projects that cannot be implemented by the private sector alone.
Last November, the Saudi central bank said it was studying draft regulations that could see the creation of a company similar to collapsed U.S. firm Fannie Mae, established by the Washington in the 1930s to finance the U.S. mortgage market.
"We studied the successful experience in other countries in terms of mortgage," Arab News on Tuesday quoted Mubarak as telling an economic forum in the western port city of Jeddah.
Central bank officials were not immediately available to comment.
November's draft said the new firm, with a minimum registered capital of 2 billion riyals would have to stay majority state-owned but real estate financing firms would be allowed to acquire stakes up to a combined total of 30 percent.
After over a decade of study, the government last June approved a law allowing home mortgages to help reduce a housing shortage in the world's top oil exporter, one of the main drivers of inflation in recent years.
The law followed King Abdullah's decision in 2011 to build 500,000 housing units for Saudis over several years as part of a $110 billion fiscal package aimed at soothing social tensions at home as unrest spread through the Arab world.
Earlier this month, Mubarak said he expected a large but gradual growth in mortgage finance activity in the kingdom, adding it would be based on studying risks.
Analysts say the desert kingdom needs to build up to 275,000 new homes a year for the next five years to satisfy demand pinned at about 1.65 million new homes.
Some banks already offer housing loans, but these must be secured against salaries, making them available only to well-paid Saudis employed by the country's leading companies.