Saudi Capitas Group to launch mortgage firm in 2012

Saudi Arabia's Capitas Group International plans to launch a mortgage finance company in 2012, its chief executive said on May 18, as a likely mortgage law in the kingdom is seen to boost sector confidence.
"We are launching the largest mortgage finance company here in order to create financing for the lower and middle income families," Naveed Siddiqui, chief executive officer of Capitas Group International, told Reuters in an interview.
Capitas Group International is a subsidiary of the Islamic Corporation for the Development of the Private Sector (ICD), part of the Islamic Development Bank Group.
ICD will set up the new mortgage firm in partnership with Saudi Public Investment Fund as a 50-50 joint venture. Siddiqui also said that ICD will inject 100 million riyals, ($26.7 million) and that currently the capital raised is a total of 1.3 billion riyals.
"At the moment we have built almost 60 percent of the company and we plan to launch it in the second quarter of 2012," Siddiqui said, adding the company will be based in Jeddah with branches in Riyadh and Khobar.
"Saudi Arabia is an interesting example, you've got one of the largest economies in the Gulf Cooperation Council (GCC), it is an indigenous population market, yet 70-80 percent does not own homes," Siddiqui said.
Saudi Arabia, the biggest Arab economy, is facing a massive housing problem due to rapid population growth and an inflow of expatriate workers coming to the kingdom which is rolling out a $400 billion infrastructure spending plan.
The absence of a clear mortgage law, which has been in planning stages for almost a decade, has left Saudi with no framework to govern property ownership, deterring foreign banks from lending and private developers from entering the market.
"Initially we will lend to Saudi nationals but there is a very strong consideration to lend to non-Saudis as well," he said. "The mortgage law is going to be passed over the next few months so that gives the whole industry a level of confidence." The long-awaited Saudi mortgage law is expected to be approved soon, the chairman of Saudi Arabia's Shoura Council said in March.