Deutsche Bank formed Deutsche Gulf Finance, a joint venture Shariah-compliant home financing firm owned 40% by the bank’s Riyadh Branch and 60% by a group of Saudi-based buyers led by Fahad Abdullah Abdulaziz Al Rajhi.
The Company has an initial capitalization of approximately USD110 million, and at first will provide Shariah-compliant home financing for properties located in Saudi Arabia, with plans to expand its operations into Bahrain, Qatar and Kuwait over time. Deutsche Gulf Finance has commenced financing completed units as well as those under construction on individual lots or at real estate developments.
Deutsche Gulf Finance ha comprehensive and customized policies as well as procedures covering all major aspects of housing finance operations and incorporating global inputs from Deutsche Bank, applicable Saudi law and regulations, and the highest Shariah standards.
Special attention has been paid to ensure proper risk controls and oversight levels are maintained, according to a release from the bank.
Deutsche Gulf Finance's launch comes at a pivotal time for consumer finance in Saudi Arabia. Deutsche Bank research reported that the total outstanding home finance provided by the private sector in Saudi Arabia amounts to less than 1% of GDP compared with well above 50% in most developed countries, and around 6% in Kuwait and 7% in the UAE.
Deutsche Bank research estimated that Saudi Arabia will need 1.2 million in additional housing units by 2015. Additionally, based on market assumptions, it projected that when the new Saudi mortgage law is enacted, it will contribute to incremental demand of roughly 55,000 added units per year.
"We are excited to partner with Deutsche Bank and benefit from its global experience in housing finance," Fahad Abdullah Al Rajhi said. "Deutsche Gulf Finance will benchmark itself against international best practices and looks forward to contributing to the growth of home ownership in Saudi Arabia."
“We are very pleased to announce the formation of Deutsche Gulf Finance, as Saudi Arabia is a key country in our emerging markets strategy, " said Doug Naidus, managing director and global head of RMBS lending and trading at Deutsche. "Islamic home finance continues to be an important part of Deutsche Bank’s global mortgage platform. Deutsche Bank’s global expertise coupled with the Al Rajhi family’s local prominence and experience make this an ideal and complementary business relationship.”
“The establishment of Deutsche Gulf Finance is an important milestone for Deutsche Bank's presence in the Kingdom and signifies our commitment to broaden and deepen our presence in Saudi Arabia as well as our confidence that the Saudi home finance market will witness robust growth," said Jamal Al-Kishi, Deutsche Bank’s chief country officer in the Kingdom.