Saudi Real Estate Refinance Company, which is owned by the kingdom's sovereign wealth fund, expects to issue its first public sukuk this year and a second private placement in the next fortnight, while developing further plans to finance an expansion of the kingdom’s home mortgage market.
The second tranche of the 11 billion riyal sukuk programme launched last month may be as big as 750 million riyals (Dh734m), chief executive Fabrice Susini told The National in an interview. The first tranche, in December, was 250m riyals.
“This will be our first proper issuance of 2019 and our next step towards increasing our presence in capital markets to grow the Saudi mortgage market,” Mr Susini said. “We are planning a third tranche this year, which we’re hoping will be a public issuance, and developing new products and services to fund our work.”
SRC was founded in 2017 by the Public Investment Fund, the kingdom’s sovereign wealth fund, to increase home ownership among Saudi nationals and develop the mortgage finance market.
The company is part of the Vision 2030 strategy to raise ownership of homes to 52 per cent of citizens from around the current 47 per cent, and boost the contribution of real estate financing to non-oil gross domestic product to 15 per cent from 8 per cent.
The sukuk programme could be expanded to foreign currency issuances to raise more money in time, Mr Susini said. For now, though, it will be limited to domestic-only, riyal-denominated placements.
The cumulative value of mortgage financing provided by banks in the kingdom almost doubled year-on-year in the third quarter of 2018 to 144bn riyals, according to figures from Saudi Arabian Monetary Authority, the kingdom's central bank. However, this represents relatively low penetration of the country’s 32 million population, Mr Susini said. The rate of home ownership – almost 50 per cent – takes into account private purchases, government subsidies and historic state-backed mortgages, which do not fall under SRC’s remit.
Mortgage refinancing is the process of replacing a mortgage on a property with a new mortgage provided to the borrower, generally with better terms. SRC aims to refinance 20 percent of Saudi Arabia’s primary home loans market within the next decade, which authorities hope to expand to 800bn riyals by 2028.
It has so far operated with financing from PIF and short-term deals with banks and mortgage providers equating to less than 6bn riyals of financing for homeowners. Through agreements with banks and other institutions, SRC expects to commit a further 3bn riyals of mortgage refinancing in the year ahead, Mr Susini told The National.
“We are in discussions with some originators and expect those relationships will translate into new agreements. As it stands, we are ready to commit 3bn-3.5bn riyals of financing this year, depending on demand,” he said.
In addition, the sukuk programme could be expanded to foreign currency issuances to raise more money in time.
For now, though, it will be limited to domestic-only, riyal-denominated placements.
The company is also working to design non-cash solutions, such as derivatives, which are investment securities that provide varying risk and interest-rate returns from bundles of mortgages. However, Mr Susini said any such products must be carefully devised to avoid overheating the market. Unregulated, high-interest mortgage-backed securities were the principal cause of the 2008 subprime mortgage crisis in the US, which then caused the housing bubble to burst and global prices to tumble.
“Right now, the kingdom’s mortgage market is nascent, but healthy,” the chief executive added. “There is not a lot of leveraging, banks are not overstretching themselves, there are no subprime mortgages and no need to reorganise the system.
“But the market is small, and we need to expand the offer and develop the practices, without leading to irresponsible lending.”
At the end of 2017, the Saudi government introduced new measures to bolster mortgage financing, such as waiving administration fees for mortgage holders and allowing them to move from one lender to another at no extra cost.
However, last May, it tightened up regulations governing the market, including imposing tougher requirement to banks to weigh borrower risk profiles before lending.
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The National Archives, Abu Dhabi
Founded over 50 years ago, the National Archives collects valuable historical material relating to the UAE, and is the oldest and richest archive relating to the Arabian Gulf.
Much of the material can be viewed on line at the Arabian Gulf Digital Archive - https://www.agda.ae/en
Results
4.30pm Jebel Jais – Maiden (PA) Dh60,000 (Turf) 1,000m; Winner: MM Al Balqaa, Bernardo Pinheiro (jockey), Qaiss Aboud (trainer)
5pm: Jabel Faya – Maiden (PA) Dh60,000 (T) 1,000m; Winner: AF Rasam, Tadhg O’Shea, Ernst Oertel
5.30pm: Al Wathba Stallions Cup – Handicap (PA) Dh70,000 (T) 2,200m; Winner: AF Mukhrej, Tadhg O’Shea, Ernst Oertel
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- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
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- Specialist robotics and science laboratories
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Your rights as an employee
The government has taken an increasingly tough line against companies that fail to pay employees on time. Three years ago, the Cabinet passed a decree allowing the government to halt the granting of work permits to companies with wage backlogs.
The new measures passed by the Cabinet in 2016 were an update to the Wage Protection System, which is in place to track whether a company pays its employees on time or not.
If wages are 10 days late, the new measures kick in and the company is alerted it is in breach of labour rules. If wages remain unpaid for a total of 16 days, the authorities can cancel work permits, effectively shutting off operations. Fines of up to Dh5,000 per unpaid employee follow after 60 days.
Despite those measures, late payments remain an issue, particularly in the construction sector. Smaller contractors, such as electrical, plumbing and fit-out businesses, often blame the bigger companies that hire them for wages being late.
The authorities have urged employees to report their companies at the labour ministry or Tawafuq service centres — there are 15 in Abu Dhabi.
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Trans fat is typically found in fried and baked goods, but you may be consuming more than you think.
Powdered coffee creamer, microwave popcorn and virtually anything processed with a crust is likely to contain it, as this guide from Mayo Clinic outlines:
Baked goods - Most cakes, cookies, pie crusts and crackers contain shortening, which is usually made from partially hydrogenated vegetable oil. Ready-made frosting is another source of trans fat.
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Our legal advisor
Ahmad El Sayed is Senior Associate at Charles Russell Speechlys, a law firm headquartered in London with offices in the UK, Europe, the Middle East and Hong Kong.
Experience: Commercial litigator who has assisted clients with overseas judgments before UAE courts. His specialties are cases related to banking, real estate, shareholder disputes, company liquidations and criminal matters as well as employment related litigation.
Education: Sagesse University, Beirut, Lebanon, in 2005.
Six large-scale objects on show
- Concrete wall and windows from the now demolished Robin Hood Gardens housing estate in Poplar
- The 17th Century Agra Colonnade, from the bathhouse of the fort of Agra in India
- A stagecloth for The Ballet Russes that is 10m high – the largest Picasso in the world
- Frank Lloyd Wright’s 1930s Kaufmann Office
- A full-scale Frankfurt Kitchen designed by Margarete Schütte-Lihotzky, which transformed kitchen design in the 20th century
- Torrijos Palace dome
How tumultuous protests grew
- A fuel tax protest by French drivers appealed to wider anti-government sentiment
- Unlike previous French demonstrations there was no trade union or organised movement involved
- Demonstrators responded to online petitions and flooded squares to block traffic
- At its height there were almost 300,000 on the streets in support
- Named after the high visibility jackets that drivers must keep in cars
- Clashes soon turned violent as thousands fought with police at cordons
- An estimated two dozen people lost eyes and many others were admitted to hospital
UAE currency: the story behind the money in your pockets
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