Tamweel brings together the legacy of two great organisations – Dubai Islamic Bank and Istithmar. Established in March 2004, Tamweel provides a whole range of Shariah-compliant products backed by customer service and innovative home finance solutions. The company has financed property worth more than Dh7 billion. Tamweel moved in July 2006 to a PJSC structure with demand subscriptions exceeding the required amount by 485 times. Tamweel has more than 235 partners and focused on becoming the leader in home financing regionally. Tamweel has branches in Dubai, Sharjah and Abu Dhabi.
Adel Al Shirawi, Chief Executive Officer of Tamweel (pictured above)
What are your projections for 2008 regarding the real estate and mortgage market in the UAE?
For 2007, the market’s expectation was about Dh54 billion worth of demand and Dh60bn supply. That fell short of the mark. Our estimate – Dh36.5bn for real estate market, which was revised to Dh39bn – was the closest for 2007.
Our expectation of the mortgage market was Dh20bn but it looks like the market will fall a little short of the target. The reason was that we fixed Dh17bn for Dubai and Dh3bn for Abu Dhabi but the capital fell short of our expectation. For 2008, we expect our business in the mortgage market will pick up in the first quarter. Also, demand for commercial space is expected to grow annually by about six million square foot until 2009. And because of the cascading effect of non-delivery and delays in the previous years, the cumulative demand in the retail real estate sector is expected to be worth Dh74bn.
What are your core strategies for growth?
We have a three-pronged strategy. Good service and product differential. We have done so by offering a range of innovative products and implementing distinct service strategies. We have been product engineers of the region. We were the first to come up with Yusr – the world’s first Shariah compliant adjustable repayment mortgage, which enables people to pay up to 30 per cent lower monthly installments in the initial years for any ready property. In a week or so we will be launching our new service that will surprise everyone. Then we have always secured the home base by being the largest mortgage provider in the high incremental market here. Today, Tamweel enjoys 34 per cent of the mortgage share of the market, has recorded a hyperbolic growth of 300 per cent each year for the past three years, announced dividends of 20 per cent each year and was the first in this region to come out with the sub-libor convertible bonds. We also have the highest net profit return of anyone in the market in the mortgage portfolio.
Third, we have not been going for haphazard expansion. We have been targeting two countries in a year. In 2007 we entered Saudi Arabia and Egypt. In 2008 we will expand to two other countries, which will become operational in 2009.
Any new bond launches planned?
Yes, we will issue new bonds in 2008 as part of our normal expansion plans. We hope to come up with a new bond structure for these as we have always led the market in this. We are working closely with our sister company Ensec and together we will come out with a new bond structure, which will be beneficial for the fixed-income security in the market place. But we cannot reveal the exact dates yet as we are still working on it.
Your recent securitisation issue was placed primarily with European investors. Why? And any securitisation issue with regional investors planned?
Our next securitisation issue will come with blended focus to regional and international investors. The reason we had one with European investors was because the market here was not ready for it.
Why the slow regional expansion?
We target two markets per year as we feel there is a lot of growth in Dubai and the UAE. It is a very big market and will remain so for the next three to four years. The next biggest market is Saudi Arabia. But Saudi Arabia will eventually overtake the real estate market of the UAE. It will take time but it will happen. Egypt is also a huge market. We are only looking at the big ticket markets where the market potential is big and the opportunities are higher.
What other markets are you tapping and will you opt for joint ventures?
Apart from the markets in the GCC and Middle East within the next five years we will be tapping South East Asia and the Subcontinent. Joint venture or not will depend on the rules and regulations in each country.
How will you finance your regional expansion?
Regional expansion finance depends on country to country. Some countries do not allow you to make corporate deposits. You have to create internal funds and bonds within the country. So our main source of funding will be IPOs, injection by shareholders and our main source will be securitisation.
Do you expect an oversupply in the market soon?
No we do not anticipate any oversupply for the next three years, because of carry over demand, the shortage of manpower and the cap on labour supply. Apart from this, there is a shortage of construction companies and the existing ones do not have the capacity to scale beyond 25 to 30 per cent in terms of growth. Developers can announce, design and sell new projects but the ground reality is different. Also the infrastructure sector will not be able to scale up beyond 11 to 15 per cent. This is because Dubai is one of the fastest growing cities in the world and last year saw major development of roads and the support structure for the metro. But still the growth in this sector will not go beyond 11 to 15 per cent as it is a difficult task to achieve that when you are building in the middle of a busy city. Infrastructure growth is much faster when you have an open area to work in. Keeping all these factors in mind I do not expect an oversupply anytime soon.
Do you see a correction in the property prices?
Not for the next three years. Villas, commercial, mid-and-low-income property is hot ticket and will remain so. If anything happens to the market it will be the luxury segments that will be hit because the flexibility in the luxury segment is less than that of the mid-and-low-income group. This is because the supply in the luxury segment is more than the demand.
Do you think it should happen?
Well, I think that a 10 per cent oversupply is healthy as it will help slow down the wild horse of real estate inflation. A 10 per cent oversupply will stabilise the rental market and it will slow down inflation. It will have a higher impact as the micro-economic indicator than as the macro-economic indicator. We can say that the five per cent rent cap was the Panadol to cure the inflation and the 10 per cent oversupply will be the vaccine.
Raising money through bonds was easy. Now with the sub-prime problem and credit crunch banks will not be interested in new bonds. How difficult has it become to raise funds from the international market?
We do not operate in the sub-prime market. In our recent portfolio rating, we were assigned AA by Fitch and Aa2 rating by Moody’s Investors Service. So as we are in the high investment grade and sub-prime will not affect us. But companies with BBB ratings and those below this will surely be hit.
Another thing that works in our favour is our funding strategy to put securitisation in the market at the right time. The other thing is to register the properties. We have to finish the registration of our properties before we issue our securitisation. We have to tap the volatility and condition before any issuance.
Prices for new developments are high so do you see an increased exposure in the next few years to the lending portfolio?
No. In fact it works the other way for us. Increase in prices will reduce the exposure on the finance that we have already put in the market.
Do you have plans to invest in the property market?
No, as we want to focus on being the leading real estate finance provider in the region. But we have bought plots in the Jaddaf area in order to enhance our product and service portfolio. Through that, we launched our land mortgage products, hence our property market investment is more tactical and relates to services or products strategy.
The Central Bank has indicated that they are relaxing banking rules. That could mean allowing more international companies to get into the market. How will that affect you and others in the property mortgage sector?
Tamweel feels competition is more than welcome. Today there are 14 financial institutions, 49 banks, four to five pure mortgage providers and more than 20 local and international banks. The big boys such as Barclays, HSBC are already here. But still we are number one. Because of our focused strategy we can meet any competition.
More banks are entering the mortgage market. How does the increase in competition affect you and other regional mortgage companies?
To be the best in the business we have worked hard. We have come out with the best products, we have been innovative and have always tried to improve our service level. The others will have to work as hard as us to meet the competition. We are not number one by chance, we are number one through hard work. And we will also have to continue working harder than before to meet the competition.
Tamweel plans to enter two new markets this year