The Saudi Real Estate Refinance Company (SRC), a subsidiary of Saudi Arabia’s Public Investment Fund (PIF), revealed that nearly 40 percent of new mortgages in Saudi Arabia during 2019 were financed through Murabaha, or cost-plus financing.

It said this rate will most likely increase due to estimates of the growth of real estate financing and housing loans during 2020.

SRC organized on Monday an Islamic Finance panel on Murabaha during which participants discussed challenges and potential solutions for the current situation on the Murabaha financing structure.

The virtual panel was attended by renowned Sharia scholars across the Kingdom, as well as Minister of Housing Majid al-Hogail.

Participants also discussed securitization, refinancing and current regulatory framework for Murabaha mortgages.

“The role of improving homeownership remains one of the most important part of the Vision 2030 that aims to increase homeownership rates to 70% by 2030. This panel on Murabaha financing reiterates SRC’s role in supporting the residential real estate financing market in the Kingdom and provide liquidity to financial institutions, reducing the cost of mortgages for citizens with products that are in line with the Sharia principles,” Hogail said.

He highlighted in his opening speech the role played by the Kingdom’s Vision 2030 in formulating clear goals that guide state and private institutions to diversify their programs and achieve the welfare of citizens under the guidance of Custodian of the Two Holy Mosques King Salman bin Abdulaziz and Crown Prince Mohammed bin Salman.

He said improving homeownership remains one of the Vision’s most significant targets as it aims at increasing homeownership rates to 70 percent by 2030.

According to Hogail, there are many available opportunities to serve the sector and boost the economy by diversifying support methods.

“This panel on Murabaha financing reiterates SRC’s role in supporting the residential real estate financing market in the Kingdom and providing liquidity to financial institutions.”

This would reduce the cost of mortgages for citizens with products that are in line with Sharia principles, he added.

“At SRC we believe in continuous improvement to our processes, regulations and products in every aspect of our business to attain our broader objective of making the mortgage market accessible to all and boosting homeownership rates in the Kingdom,” said SRC CEO Fabrice Susini.

“Murabaha is one of the most important tools in Islamic Finance that allows a beneficiary to transfer the title deed of the asset in their name – making it the preferred financing structure, especially in case of home mortgages,” he explained.