Dubai Bank waives loan charges for delay period

Dubai Bank has agreed to waive or fully refund advanced rental charges for the period beyond the “expected date of delivery” of a project, Emirates 24|7 can reveal.

In a letter emailed to its customers, the Shariah-complaint bank said: “In those specific situations where the delivery of the property under construction has been delayed beyond the ‘expected date of delivery’ [i.e. the completion date plus the contractually defined extension period], advanced rental charges for the period following the ‘expected date of delivery’ will be waived and/or fully refunded for all eligible customers.”

The move is likely to bring respite to many who are under burden to pay large sums of money at handover time to the bank.

Besides, it will set a precedent for other banks who will now be forced to waive the additional interest (profit) they charge on delayed projects.
 
Dubai Grand Mufti Dr Ali Mashael had told this website that charging of profit for the delayed period by Islamic finance companies was non-Islamic, or “haram“.

“As per the Islamic finance principles, the two parties must stick to the original agreement. Also, the bank should not charge the customers the rent amount or profit during the property delay period. This is the risk which the bank should take alone and not pass it to the customers,” he had said.

Tamweel’s interim CEO Varun Sood had told this website in November: “We are charging only what has been committed with the client at the time of signing of the contract, unless contract provisions allow for an additional profit up to a maximum defined in the contract.”

In the letter, Dubai Bank also stated that existing clients whose Ijarah rate was based upon the Dubai Bank Base Rate (DBBR), the applicable rate on their Ijarah facility will be reduced by one per cent, effective May 1, 2011. And for those customers linked with the Emirates Interbank Offered Rate (Eibor)-based facility, the effective rates will be revised retroactively from the beginning of the first rate reset period to align with the applicable Eibor rate plus any mark up as stated in the agreement.

The bank will also offer the discount arranged to clients, currently in default, if they reach a settlement agreement with respect to the defaulted Ijarah facility.

Number of investors were upset by the fact that profit/interest was piling up due to the delay in projects and banks (Islamic or conventional) not ready to waive or lower their charges. Several investors had complained to this website, claiming banks and mortgage firms were not in compliance with Shariah principles.

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