Housing Finance Market in Saudi Arabia 2025
In August 2025, Saudi Central Bank (SAMA) approved the Saudi Real Estate Refinance Company (SRC) to issue the Kingdomโs first residential mortgage-backed securities (RMBS). It is an historic move that will transform the Saudi Housing Finance Market, opening up new sources of capital and powering long-term housing lending. The move could catalyze both real estate expansion and financial innovation as the Saudi Real Estate Market has succeeded in passing SAR 500 billion in transactions each year, and the demand to own homes has increased steadily under the Saudi Vision 2030 plan.
SAMAโs Initiative to Strengthen Housing Finance
Saudi Central Bank (SAMA housing finance) has always been instrumental in establishing financial stability and innovation in the banking and mortgage sectors within the Kingdom. By condoning the entry of Saudi Arabia mortgage backed securities, SAMA is hoping to make portfolios of residential real estate financing tradeable securities.
This securitisation model is aimed to:
- Increase investor base: Increase the investor base and bring international capital.
- Diversify funding: Diversify the sources of funds to banks and mortgage providers.
- Strengthen markets: Strengthen the domestic debt market, and provide new investment opportunities.
- Support lenders: The project does not only reinforce the Saudi housing finance sector, but also supports the wider economic goals by allowing lenders to increase their ability to issue long-term housing loans.
Introduction of Mortgage-Backed Securities in Saudi Arabia
The introduction of mortgage-backed securities (MBS) in Saudi Arabia is the first introduction of this type of financial instrument in the Kingdom. In the traditional system, Saudi housing finance was dependent on bank lending and government sponsored programs. Nevertheless, the increasing housing needs and the growth of the Saudi real estate sector necessitated a more sustainable and diversified financing system.
The mortgage backed securities are characterized by the fact that they pool together residential mortgages and convert them into investment grade securities which are then sold to investors. This system offers liquidity to lenders who in turn are able to issue more loans to the citizens with institutional investors seeking stable and asset backed returns.
Worldwide, MBS have been the main contributors of financial innovation in real estate markets. Saudi Arabia is one of the first countries to have joined this framework, which is an indication of the willingness to implement international best practices to suit the local market and its Saudi Vision 2030 objectives.
Boosting the Real Estate Market Through Financial Innovation
The entry of Saudi Arabia mortgage-backed securities is likely to have a significant effect on the Saudi Real Estate Market. This will enable developers as well as financial institutions to be in a better position to cater to large-scale housing and infrastructure projects by unlocking access to new sources of funds.
The most important anticipated benefits are:
- Increased lending: More lending ability to banks to support rising demand for mortgages.
- Affordable housing: Increased access to affordable housing finance to Saudi citizens.
- Greater liquidity: Increased liquidity within the financial system, which helps to increase investor confidence.
- Foreign investors: Attracting foreign institutional investors in the Saudi Housing Finance Market.
The introduction of mortgage-backed securities is an important step forward, coupled with recent regulatory changes including the Saudi freehold law allowing foreign investors to own property in specific areas for the first time. Collectively, these reforms will increase transparency, openness, and development in the Kingdom as its real estate sector continues to evolve.
Implications for Homeownership and Economic Growth
At the center of the Saudi Vision 2030 is homeownership, which has set a target of raising the number of Saudi families owning homes to 70 percent by 2030 compared to the current 60 percent. Mortgage-backed securities are an important means of helping to achieve this objective as they enable the financial institutions to meet the increased long-term housing finance demand.
The consequences extend beyond household level:
- Economic diversification: Saudi Arabia is less dependent on oil revenues through the intensification of the financial sector.
- Job creation: Increasing projects in housing and construction will create jobs in various sectors.
- Urban development: Financing innovations speed up the construction of modern housing sectors, intelligent cities, and mixed-use developments.
- Foreign investment: The new foreign investment through the securitisation and freehold ownership laws makes Saudi Arabia a more appealing market to international investors keen on exploring the world of real estate in the fastest-growing region of the Middle East.
Essentially, the securitisation program is a financial innovation and a social policy catalyst, which links capital markets and homeownership dreams of the citizens.
