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Abu Dhabi launches dedicated mortgage company
While Dubai's mortgage market is consolidating around a merger involving the duopoly of Amlak and Tamweel, Abu Dhabi has gone ahead and launched its own mortgage company.
- Manoj Nair, Editor & Nicole Walter, Features Editor
- Published: 14:48 December 1, 2008
- Image Credit: Supplied
- Analysts say the new mortgage firm will have a big influence in extending the growth momentum of Abu Dhabi's property market.
While Dubai's mortgage market is consolidating around a merger involving the duopoly of Amlak and Tamweel, Abu Dhabi has gone ahead and launched its own mortgage company. The launch of Abu Dhabi Finance confirms what has long been rumoured to be an inevitability — the emirate's need for a pure-play mortgage provider.
Giving the new entity all possible clout right from inception is the presence of four leading master developers — Aldar, Mubadala Development Co, Sorouh Real Estate and Tourism Development & Investment Co (which recently ventured into the residential space). The fifth shareholder is Abu Dhabi Commercial Bank, which already has a fairly well-entrenched presence in the local mortgage market.
It is reliably learnt that Abu Dhabi Commercial Bank will maintain its own mortgage operations. The bank is now rated as a strong Number 3 within the local home financing space, a position it has built up in the last two years.
What of Abu Dhabi Finance? From conception to formation it took more than 12 months, and the company will have a full range of home financing packages from Day 1. Loan-to-value ratios of up to 85 per cent will be on offer (quite a rarity in mortgage circles these days), while loan terms vary between three and 30 years. Debt service ratios range up to 55 per cent.
While the mortgage market has tightened considerably in the last four weeks, Abu Dhabi Finance should not have too much of an issue connecting with future clientele. There is also the fact that Abu Dhabi's freehold space is dominated by UAE and GCC nationals more interested in owning a home than in flipping. (Having said that, speculators did make an aggressive play on acquiring — and selling — property in the capital city during and immediately after Cityscape Abu Dhabi early this year.) Moreover, in the changed market circumstances, it does not need to be too aggressive in courting business. It will start off with offering financing to investors in Aldar, Sorouh and TDIC developments, which are invariably pitched to the premium end of the residential market.
At a later stage, Abu Dhabi Finance will extend its range to cover other developers in Abu Dhabi and over time in the other emirates as well.
What of prospects for the newly created entity brought about by the merger of Amlak and Tamweel? It is a given that it will not be just content with taking its chances in Dubai alone. Even prior to the merger, Amlak had a direct presence in Abu Dhabi. “There was always the feeling Abu Dhabi will want its own mortgage provider, sooner rather than later, rather than rely on providers headquartered in Dubai,'' says a real estate analyst. “Abu Dhabi Finance would have a huge influence in extending the growth momentum of Abu Dhabi's property market.''
Soundbytes
“Abu Dhabi has extremely strong banks that are already players in the mortgage market. The developers have begun to partner with banks that offer mortgages — First Gulf Bank/ADCB — instead of Dubai-based mortgage finance houses.'' Deepak Tolani, Senior Associate, Equity Research at Al Mal Capital
Fact Box
The shareholders in Abu Dhabi Finance, which has an initial capital of Dh500 million, include developers estimated to represent more than two-thirds of the new units being built in Abu Dhabi.
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