Deutsche Bank has partnered with a group of prominent Saudi-based investors, led by Fahad Abdullah Abdulaziz Al Rajhi, to establish Deutsche Gulf Finance, a joint venture Shariah-compliant home financing company.

As per the agreement, Deutsche Gulf Finance will be 40 per cent owned by the Bank’s Riyadh Branch, while the 60 per cent stake will be controlled by the Al Rajhi-led group.

The company has an initial capitalisation of $110 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, said a senior official.

'We are excited to partner with Deutsche Bank and benefit from its global experience in housing finance. Deutsche Gulf Finance will benchmark itself against international best practices and looks forward to contributing to the growth of home ownership in Saudi Arabia,' said Fahad Abdullah Al Rajhi.

Deutsche Gulf Finance has commenced financing completed units as well as those under construction on individual lots or at real estate developments, he added.

Doug Naidus, managing director and global head of Residential Mortgage Backed Securities Lending and Trading at Deutsche Bank, said: 'We are very pleased to announce the JV, as Saudi is a key country in our emerging markets strategy. Islamic home finance continues to be an important part of the 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,' he remarked.

'Deutsche Gulf Finance maintains comprehensive and customized policies and 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,' Naidus stated.

'Also special attention has been paid to ensure proper risk controls and oversight levels are maintained,' he added.

Jamal Al-Kishi, Deutsche Bank’s chief country officer in the Kingdom, said, 'The establishment of Deutsche Gulf Finance is an important milestone for the Bank's presence in the Kingdom and signifies our commitment to broaden and deepen presence in Saudi Arabia as well as our confidence that the Saudi home finance market will witness robust growth.'

The company said the launch comes at a pivotal time for consumer finance in Saudi Arabia.

According to Deutsche Bank Research, the total outstanding home finance provided by the private sector in Saudi Arabia aggregates to less than 1 per cent of GDP compared with well over 50 per cent in most developed countries, and 6 per cent in Kuwait and 7 per cent in the UAE.
 
Deutsche Bank Research projects Saudi Arabia will need 1.2 million additional housing units by 2015. In addition, based on market assumptions, it estimates that when the new Saudi mortgage law is enacted it will contribute to incremental demand of approximately 55,000 additional units per year, the company said.-TradeArabia News Service