UAE to launch new mortgage company despite gloomy prospect of property market
Special Report:
ABU DHABI, Nov. 26 (Xinhua) -- Five large companies in Abu Dhabi, capital
of the United Arab Emirates (UAE), will launch a joint-venture mortgage company
despite a gloomy prospect of the country's property market due to the global
financial crisis, local newspaper The National reported on Wednesday.
With capital of 500 million dirhams (136 million U.S. dollars), the new
mortgage company named "Abu Dhabi Finance" is a joint venture between Mubadala
Development, Abu Dhabi Commercial Bank, Aldar Properties, Sorouh Real Estate and
the Tourism Development and Investment Company, according to the report.
Abu Dhabi Finance will initially provide mortgages to customers purchasing
properties from Mubadala Development, Aldar Properties and Sorouh Real Estate,
which account for two thirds of real estate projects in Abu Dhabi.
The company will offer mortgages with loan-to-value ratios of 85 percent, a
relatively favorable percentage under current circumstances.
The lack of liquidity has forced financial institutions to tighten their
purse strings since the global financial crisis swept the world in September.
One of the major foreign banks operating in the UAE Lloyds TSB decided
earlier this month to stop lending to customers who wanted to buy apartments. In
the meantime, the bank lowered its loan to value ratio on villas to 50 percent
from 80 percent in October.
The UAE Ministry of Finance announced on Saturday that it has started the
official procedures to merge the country's two leading sharia-compliant mortgage
lenders, Amlak Finance and Tamweel.
Amlak Finance, the UAE's largest publicly held Islamic finance company,
said last Wednesday that it was temporarily halting new home loans as the
rolling effects of the global credit crunch on Dubai's previously buoyant real
estate sector continued to emerge.
The UAE property market, which has seen a boom since the government allowed
foreign investors to buy property on a free hold basis in 2002, is likely to
face a downturn this year.
HSBC said earlier this month in a report that property prices fell in
October by four percent in Dubai and five percent in Abu Dhabi, which is the
first ever since 2002.
