Tamweel resumes home financing after two years

Islamic mortgage firm Tamweel resumed home financing today after a hiatus of two years, said Varun Sood, CEO for Home Finance Division.

The company would offer up to 80 per cent financing of finished residential properties in Dubai and Abu Dhabi, he said.

Tamweel enters a market which wears a bleak outlook according to some experts. Mortgage defaults in the UAE will continue to pile up in the coming months, the head of a Dubai-based debt consultancy has warned.

“I fear there are going to be more mortgage loan defaults and banks are already positioning themselves for that by either increasing provisions or by repackaging mortgage loans to make them more flexible,” Yohannes Mazeingia, Managing Director, ISDM Consultancy, a Dubai-based credit counselling and debt management company told Emirates 24|7.

“Until employment is not secured, default on debts would continue,” he warned. “As things stand, the economic situation has made some slight improvements, and it would take some more time to trickle down to the consumers level in terms of securing their employment,” he explained.

Mewanwhile, Sood said, "Tamweel is back in business. With a renewed focus on prudence and conservatism, we are focused on booking a high-quality portfolio of select customers and properties."

"While the past two years have been extremely challenging for the company — during a period of unprecedented turmoil in the global real estate and financial services sectors — we have persevered. All of us at Tamweel are grateful for the support of our stakeholders over that period," he was quoted as saying by Gulf News.

Dubai Islamic Bank recently raised its stake in mortgage finance firm to 57.33 per cent, becoming the largest shareholder in the company.

In order to avert a massive default crisis at the individual and corporate level, banks in the country have already been undertaking restructuring exercises as far as real estate loans go.

Abdullah bin Khalaf Al-Otaiba, Director of the Corporate Banking Group at the government-controlled National Bank of Abu Dhabi (NBAD), confirmed this to media earlier in the month, acknowledging that UAE banks are studying this option because of the steep decline in the property asset value.

“They also realise what guarantees they have received when they extended these loans… it has become clear to them that the income from mortgaged property will not cover the debt instalments agreed on between the banks and debtors before the eruption of the global fiscal crisis,” Otaiba was quoted as saying by the Arabic language daily Emarat Alyoum.

“This is encouraging banks and debtors to consider restructuring of the mortgage loans… extending the period of repayment with unchanged interest rates is among the options being considered,” he added.

On the other hand, the chairman of mortgage lender Tamweel said last week that mortgage defaults in Dubai have shown signs of stabilising, suggesting the emirate’s real estate market may be recovering, and Dubai developments need less financing.

“It peaked at 4.8 per cent a quarter ago and now it’s come down to 3.8 per cent," Sheikh Khaled Bin Zayed Al Nehayan said of Tamweel’s monthly mortgage default rate, on the sidelines of the World Economic Forum for the Middle East and North Africa in Morocco.

“That gives you an indicator of where the real estate market is,” Al Nehayan told reporters. “People who have bought during the peak are still paying, they are in the market and interested to keep their property, and we don’t see a huge sign of deterioration in our portfolio.”

However, opinion on whether or not Dubai property prices have bottomed out remains split wide open.

Saudi billionaire Prince Alwaleed bin Talal has forecast that Dubai’s depressed property prices will take several more years to hit bottom and start a recovery because the market is still oversupplied.

“There are new buildings coming out. I think we have not seen the bottom in real estate [in Dubai], there are years to come,” Alwaleed said in excerpts of an interview with Arabian Business online magazine posted on Thursday.

“I don’t believe you are there yet because more supply is coming,” said Alwaleed, a nephew of Saudi Arabia's King Abdullah, in the interview.

“Many landowners are holding their old prices. Someone has to give in. The price has to go down, substantially. It’s supply and demand – it’s a no-brainer,” he added.

In contrast to the remarks made by Prince Alwaleed, Al Nehayan said he did not see a huge supply of ready units flooding the Dubai market in the near future. “The numbers that we used to talk about in the industry  of 50,000, 60,000, and 80,000 units coming on every year – we’re not seeing that,” he said.

“There is no glut coming up in the next three years because nobody is paying for it, and the contractors are not delivering it, and the developers cannot continue with these projects,” he said, adding that scaled-down projects and developments phased out over longer periods of time are “good news” for the industry.

Mortgage defaults peaked over the summer period but started to decline when Dubai World announced last month it reached an agreement its creditors to restructure $24.9 billion of debt, Al Nehayan said. “When that announcement happened, we saw the turnaround already.”

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