StrideUp has secured GBP280 million (US$343.02 million) which will be channeled toward rolling out its Shariah compliant digital home financing product to around 1,000 customers in the UK.
ARA Venn, a specialist investment manager of private debt in the residential sector, and the co-owner of StrideUp, confirmed in a statement that it has raised funds of up to GBP280 million to invest in home purchase plans (HPPs) to be originated by the UK-based start-up. It is intended to be the first in a series of mandates.
Regulated by the Financial Conduct Authority, StrideUp allows buyers with a 10% deposit to purchase up to 80% of their new home in partnership with StrideUp, and rent the remaining 20% share from StrideUp until they are ready to acquire more, in increments of their choosing. The value of the remaining share is locked at the initial purchase price, insulating buyers from market price increases while any losses from house price declines are shared with the start-up. This diminishing Musharakah scheme has been certified as Shariah compliant by Mufti Faraz Adam from Amanah Advisors.
“Over the past decade, house price growth has outstripped income growth, meaning that the average house price to income ratio for first-time buyers in the UK now stands at 6.9. However, the vast majority of traditional mortgage lending is capped by regulation at a loan to income ratio of 4.5, which puts homeownership out of reach for huge swathes of the market. The StrideUp product addresses this problem by providing finance at a loan to income ratio of up to 6.5, subject to prudent affordability tests,” explained ARA Venn.
StrideUp’s product draws on elements of the UK government’s help-to-buy equity loan scheme which has supported the purchase of over 350,000 homes with loans worth GBP22 billion (US$26.95 billion) since 2013, according to ARA Venn. The government recently announced plans to close this scheme to new applications on the 31st October, making StrideUp’s HPP rollout timely.
“StrideUp’s mission is to build a more affordable and accessible way for first-time buyers to get on the housing ladder and that has never been more relevant. With surging house prices and constraints on traditional mortgage lending, deposits are often falling short, and at the same time people are spending more on rent and living costs. With this new funding deal, StrideUp is uniquely positioned to offer a genuine alternative. We’re excited to be partnering with investors who share our vision of building a fairer and more accessible housing market,” commented Sakeeb Zaman, the co-founder and CEO of StrideUp.