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Thursday, December 8, 2022

Launch Partners

Funding for Housing to issue UK social housing Sukuk in first quarter of 2023

Funding for Housing is set to issue a government-backed GBP500 million (US$568.39 million) Sukuk facility in the first quarter of 2023 to provide off-balance sheet funding for local authorities for social housing projects.

Funding for Housing, which is part of the Al Waseelah Sukuk issuance platform, signed an MoU with green modular house builder ZeroWatt Homes to provide a range of low-cost homes for the UK social housing rental sector.

“We are very encouraged by our MoU and believe that with the incoming funds, we will be able to provide energy self-sufficient homes at a time when the needs for more social housing stock are not being met by the local authorities,” Dr Scott Levy, the founder of Al Waseelah, told ISFI.

Dr Levy added that the UK needs over 300,000 homes and Funding for Housing is the first step in creating a combined effort between market participants and high-quality, high-impact solutions.

Government-backed through the rent support mechanism and consumer price index (CPI)-linked, the Sukuk will be based on either the Wakalah or Ijarah concept depending on investor preference based on tax advice. ISFI also learned that Funding for Housing is seeking sustainability labeling for the upcoming Sukuk.

The rent support mechanism in the UK is such that rents are paid by the central government and are index-linked. The money is disbursed through the various and multiple local authorities but the funds come from HM Treasury.

The facility will provide up to 30-year amortizing bonds (Sukuk) at a rate of the benchmark rate plus 200–300bps plus the UK CPI rate which will be capped at 5% per annum, with semi-annual distributions after the first year.

While the upcoming Sukuk will be worth GBP500 million, there are plans to increase the issuance to GBP1 billion (US$1.14 million) within 12 months of the first issuance through two further tranches.

The social housing funded by the issuance, which will tap the international capital markets, will be linked to local incomes and address the social housing needs in the UK by helping councils finance the build of social housing stock.

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