RIYADH – Saudi Arabia's national home finance company, Bidaya, may open its doors by the end of this year, part of efforts to raise low levels of home ownership in the country, its founding sponsor said. In development since 2010, the company is a venture between the finance ministry's Public Investment Fund and the Jeddah-based Islamic Corporation for the Development of the Private Sector (ICD), a unit of the Islamic Development Bank (IDB). Bidaya is in its last phase of development prior to launch and will submit an application for a license as soon as regulations under the Kingdom's mortgage laws are finalized, ICD chief executive Khaled Al-Aboodi told Reuters. “Practically, we are planning to have the company operational by the end of 2014.” “Bidaya will increase access to finance for middle-income home buyers across the Kingdom. Bidaya is an important project for the ICD and Saudi Arabia given its impact on the Saudi market and the sustainability of the sector,” Al-Aboodi said. He said the “target size” of its paid-up capital would be SR900 million ($240 million). The firm will use Shariah-compliant financing contracts such as ijara (Islamic leasing), diminishing musharaka and hybrid structures designed to meet local regulations, Al-Aboodi added. In diminishing musharaka, the lender and home buyer share the costs of purchasing a home; the home owner then pays rent to the lender while purchasing the lender's share of the house in instalments. Capitas Group International, an international management firm with experience in setting up Shariah-compliant mortgage and real estate finance platforms, has been helping to prepare Bidaya for launch. Home ownership in Saudi Arabia is just 30 percent, compared to a global average of 70 percent, while mortgage penetration is estimated at just 2 percent of gross domestic product, Al Rajhi Capital said in a research note in January. Mortgage loans exceed 50 percent of GDP in many developed countries. Home financing options offered by Saudi banks in the past have been limited; for example, buyers have had home payments automatically deducted from their salaries by lending banks. In 2012 the Kingdom introduced a package of mortgage laws, and since last December, the central bank has issued six real estate financing licences to institutions including Riyad Bank, ANB and Amlak International. – Reuters
