Safqah Capital eyes listing on Saudi market

Safqah Capital’s CEO Abdullah Alsubaie.

Safqah Capital’s financing volume has reached nearly SAR 5 billion since its launch around two years ago, funding various real estate development projects that have contributed to the delivery of around 5,000 housing units to the market, CEO Abdullah Alsubaie said, noting that the company aims to list on the Saudi market.

Speaking to Argaam on the sidelines of the Money20/20 Middle East conference in Riyadh, Alsubaie added that the value of guarantees in the financing portfolio exceeds twice the financing volume, while the average annual return for investors through the platform stands at around 14.5%.

He explained that Safqah Capital provides financing solutions for real estate developers using sukuk and debt instruments. The products offered include land acquisition financing, development financing, raw land financing and mixed-use project financing.

He indicated that financing costs vary depending on the nature of the product and the level of risk, with costs higher for land acquisition financing due to the larger funding requirements at the start of a project, compared with development financing, which is disbursed in installments linked to project completion stages and funding needs.

Alsubaie said the real estate market is moving toward a more mature phase following a period of sharp increases in land prices and project margins. This requires developers to reconsider their project financing mechanisms and place greater focus on return on equity rather than the profit margin of an individual project.

He added that changes in the sector, including white land fees and regulations governing leasing and foreign ownership, have prompted developers to adopt more institutional business models.

He noted that the greatest impact has emerged at the unit sales stage, amid several factors, including changes in the real estate sector and liquidity challenges facing the banking sector, which have affected customers’ purchasing power and sales at some projects.

Regarding the quality of the financing portfolio, the exec commented that around 93% of financing was repaid on time or ahead of maturity, while the remaining financing experienced delays ranging from 30 to 60 days. The default rate stood at around 0.07%.

He clarified that the company relies on several indicators to manage risks, including the loan-to-value ratio, project cost and sales. The financing-to-project-sales ratio typically does not exceed 35%, meaning that selling around 35% of a project’s units could be sufficient to cover the debt.

On financing for small and medium-sized enterprises (SMEs), Alsubaie said financing costs are linked to the level of risk compared with large companies. He noted that fintech companies are distinguished by the speed of their procedures, with financing through Safqah able to be completed in less than a week.

He also pointed out that Safqah Capital aims to list its shares on the Saudi market in the coming years, stressing the company’s commitment to pursuing the listing at the earliest appropriate opportunity.

He noted that the company closed a SAR 57 million seed funding round at the beginning of this year, with participation from more than 12 investment entities. SNB Capital subsequently joined as a strategic investor, supporting the company’s expansion plans and efforts to increase its financing volume.