The UAE’s mortgage market will leap from Dh20 billion by the end of this year to Dh64bn over the next three years, with more than 60 per cent of home financing to be Shariah-compliant, the International Ras Al Khaimah Family Office and Investment Summit heard on Tuesday.
Islamic banking and finance specialist Dr Sabahuddin Azmi, told delegates that outstanding credit in the UAE housing market, which stood at Dh17bn at the end of 2006, will touch the Dh20bn mark at the end of 2008 and is expected to rise sharply between now and 2011 as real estate growth exceeds an estimated Dh419bn during this period.
Dr Azmi, a professor at the Emirates Institute for Banking and Financial Studies in Sharjah, said Amlak Finance and Tamweel, both Shariah-compliant, dominate the UAE housing finance market, holding 35 per cent and 25 per cent share respectively. The rest is shared by other banks and finance houses.
Explaining home financing Islamic solutions, he said Shariah-compliant offerings could be arranged for existing homes or under construction homes. The charges can be fixed or variable.
The offerings for completed property are: Murabaha, Ijarah, Musharakah. Whereas, for property under construction are: forward Ijarah and Istisna’. And, Murabaha and Istisna’ are fixed rate financing techniques, whereas Ijarah is the variable rate financing, he added.
According to Islamic financing it is important the bank bears a certain amount of asset risk for its profits to be deemed legitimate, he said.
The transparency and structure demanded of Islamic finance products is also attracting investors burned by the sub-prime crisis, he added.