Operating in what is considered the most vibrant property market in the world, mortgage lender Tamweel has said it expects sales to grow by 70 to 80 per cent this year, after a phenomenal performance in the first quarter of this year. And the Shariah-compliant firm is now seeking to be restructured as a holding company. Emirates Business spoke to Wasim Saifi, Tamweel's new CEO, about expectations for the company's recently launched international operations. The interview also covered the company's rapid growth and Saifi's view of the performance of the market at large.
How have your profits been for the year?
During the first quarter of this year, Tamweel's mortgage sales reached Dh2.6 billion. Corresponding figures for the first quarter of 2007 were Dh650 million. What we have achieved in the first quarter of 2008 is the equivalent of our performance for the entire 2006. Tamweel earned a net profit of Dh176.34m in the first quarter of 2008, an increase of 249 per cent compared to Dh50.47m in the first quarter of 2007. Islamic financing and investing assets in the first quarter of 2008 rose to Dh6.63bn, an increase of 120 per cent compared to Dh3.01bn in the first quarter of 2007. Income from Islamic financing and investing assets in the first quarter of 2008 rose to Dh139.51m, an increase of 128 per cent compared to Dh61.23m in the first quarter of 2007. Overall, we are projecting a growth in profits by 70 to 80 per cent this year in comparison to the previous year.
To what do you attribute to the upbeat trend in the lending market?
The market has been growing rapidly. With developments getting closer to completion, the mortgage conversion ratio has started rising rapidly. Hence, we have seen an increased transition of the buyer segment becoming end-users, which has been contributing significantly to the strength of the mortgage market.
Tell us about your expansion into Saudi Arabia and Egypt.
We recently entered into a shareholder agreement with Al Oula Development Company in Saudi Arabia and Tamweel has secured a 70 per cent stake in the partnership. We have just applied for our licence and expect to start operations there by October. In Egypt we have secured a licence and we should be up and running by July. These are potential markets for us since it is our first step out of the UAE. We expect to generate revenues from these markets from 2009 onwards. Down three to four years, we believe, they would make up 30 per cent of our overall revenues.
Can you share details about your recent syndication deal? What will be the pricing of this facility?
The deal is a $235m (Dh862m) syndication that we have done. It was lead-managed by ABN Amro Bank and Noor Islamic Bank. This was the first loan syndication for Noor Islamic Bank since they are relatively new in the market. The finding happened about April this year. The facility has numerous participants, including banks from the UAE and Bahrain. But what is more interesting is that we have had two banks participating from Taiwan and one from Singapore. The pricing, including all fees, was based on 120 basis points plus Ibor. That is an exciting pricing.
What is in the pipeline for Tamweel?
One of the big areas we are looking at now is Abu Dhabi. We are very bullish about trends there and see substantial opportunities for us. We are working very closely with some of the developers there and are making a strong pitch at the moment.
Most of Abu Dhabi's developments are still off-plan and major completions and handovers have yet to commence. Why do you want to enter the market now?
We feel this is the right time to enter the market and establish a presence. It is essentially off-plan, which is why we expect our mortgage book to significantly rise as some projects are nearing completion and some are half-way there. The years 2008 and 2009 will see handovers commencing in capital.
Would you say Islamic financing is still an untapped market, considering the enormous funds available?
More people are becoming convinced that this is the right way to bank here. If you see the progress of Islamic banking in the country, it is moving very rapidly. Three years ago Islamic banking constituted only about six to seven per cent of the total banking buy. Last year it grew to about 14 to 15 per cent and the expectation is that in the next three to four years it will constitute at least 20 to 22 per cent of total banking. So every year we are seeing a rapid growth and every three years the share is doubling. There is more to tap from the market. Take Tamweel for example, what is different about us as an Islamic finance house is that 50 per cent of our clients are non-Muslims.
Have you lowered your profit rates recently? Are we going to see any significant impact from global rate cuts?
We lowered rates about two months ago by 50 basis points and we will review the rates further. That takes our current profit rates in the region to seven to eight per cent. We do apply different rates to different products but this would be the comfortable range we are working on. Global rate cuts will not have an immediate impact in the market. That will happen only three to four months after we re-price ourselves. The impact on the reduction in our cost of funds will be seen only in the next three to six months. In other words, the impact of the new rates we pay for any funding we obtain from our sukuk market or from the banks will be felt by consumers only three to four months later.
How do you see commercial lending in the near future?
The demand for commercial properties in Dubai will remain high for the next three years. We estimate a demand of more than six million square feet of commercial space every year for the next three years, and we are keen to capitalise on this market opportunity. We recently signed an agreement with Al Tamimi Investments, a Dubai-based diversified investment company, for their commercial venture in MotorCity. As per the agreement, Tamweel will provide up to 80 per cent finance for Al Tamimi's two commercial towers – Daytona House and Detroit House in MotorCity. The towers are scheduled for a completion in 2009 and the project will be managed under Tamweel's Escrow Management Services. To date, Tamweel's total lending for mortgages is Dh11 billion so far.
What about 100 per cent lending?
For us loan-to-value is important. We want people to take mortgages for amounts they can service. At the end of the day, if you are going to facilitate lending that will result in over-leveraging, people are taking more than what they can afford and we don't favour that. Currently, the market, with a population of four to 4.5 million, has about four or five non-bank finance companies and around 23 to 24 banks that are offering lending options – which is a fair number of players.
Wasim Saifi CEO, Tamweel
Wasim Saifi is CEO of Tamweel, a Shariah-compliant finance house based in Dubai. Prior to his appointment to the top spot three months ago, Saifi was a member of Tamweel's board of directors and had served as chairman of its audit and risk management committee since 2005. Saifi previously was the executive vice-president and head of retail and business banking at Dubai Islamic Bank. He has more than 20 years of international experience in the banking and financial industry and has held senior positions with Mashreq, American Express and Standard Chartered. Saifi holds an MBA from Rutgers University in the United States.