Mortgage portfolio stays static since June 2009
The real estate mortgage portfolio of UAE banks failed to record any growth during the second half of 2009 despite the fact that the two key players, Tamweel and Amlak, virtually kept away from new financings during this period, the statistics reveal.
Though there had been marked growth in the mortgage loan portfolio of banks in 2008 and the first half of 2009, the growth was stunted thereafter. The total real estate mortgage loans by UAE banks that stood at Dh56.47 billion as of 2007-end surged by 125 per cent to Dh125.834bn as of December end 2008. During the first half of 2009, the real estate mortgage loans grew by about 10 per cent to reach Dh137.245bn as of June end, 2009.
But thereafter, the growth has been very marginal with portfolio reaching Dh137.556bn as of July end, Dh137.863bn as of August end and Dh138.314bn as of September end. According to mortgage experts, the same weak trend continued in the last quarter of 2009 ending December 31.
Though banks, in general, have been vocal about announcing their entry into mortgage loan segment, most banks refused to quantify the size of their portfolios. There are several banks which are planning to enter mortgage business.
“The valuations of real estate assets are attractive and I believe this is the right time for anyone to buy a piece of real estate,” said Tom Smith, Executive Vice-President, Retail Banking, United Arab Bank (UAB).
An earlier study had found that only 25 per cent of the real estate deals have been done through mortgage loans. “This means most of the purchases are taking place through own equity. This is not a good sign and if the banks do not come forward to fund the real estate deals, the property market will remain subdued,” said a mortgage expert. Already the mortgage industry has been impacted by controversies in the pricing mechanism followed by some banks. Many banks have switched to their own base rates leaving behind the common benchmark of Eibor. “While some banks have done it for new loans, some banks have gone ahead with it despite opposition from the borrower,” another analyst said.
Correspondences carried out between a group of borrowers and a Dubai-based private sector bank, the copies of which are with Emirates Business, show that the bank has unilaterally switched to its own base rate citing a clause that allows the bank to do so.
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