Real Estate Development Finance [RDF] is a structural variation of existing financing products of YANAL such as Finance Lease or Murabaha Finance. The product structure focuses real estate developers where funding is provided to develop commercial or residential projects and repayment is through sales proceeds of developed properties. The target real estate projects will be.
• Land development for re-sale
In Saudi Arabia there are companies involved in developing tract of land by subdivision into plots
along with construction of access roads and provision of utilities such as electricity, water and sewerage structure. Such developed lands are sold as smaller plots of bare lands for construction purpose and time frame for such developments are considerably low depending on the magnitude
of the project.
• Residential Land Development Project for re-sale
This category represents the business entities involved in constructing residential projects. In Saudi Arabia it is commonly seen development whereby villas and condominium/ apartment are constructed for residential purposes. The time frame for a smaller residential development project up to 10 units is approximately 18 to 24 شهر, however it may vary depending on the complexity of the project.
• Commercial Land Development Project for re-sale
This category includes development of land for commercial usage such as retail stores, malls and shopping centers, utility stations or service areas, office spaces, restaurants, convenience stores, and hotels or motels. When assessing such request, higher weightage is given to client’s cashflows from the project and past experience in developing similar projects.
Product Overview/ Structure
RED Finance structure aim to ease and provide cashflow for the real estate developers, and the funds are utilized to develop raw land, construct housing or commercial units for re-sale. Generally, the financing is structured only to pay interest for a certain period and the leeway of a suitable balloon payment(s) at the end of the term. Further, as and when the construction work of the project is partially completed and ready to sell, the client is given the option to settle partially and release real estate in proportion to the settlement.