Dubai: The move to merge Amlak Finance and Tamweel - the UAE's biggest Islamic mortgage providers - under the Real Estate Bank (REB), a UAE government entity, is a direct intervention by the UAE Government in rescuing troubled state assets, industry observers and analysts said yesterday.
"The fact that the UAE Government is ready to support Dubai is a good thing for the markets. The federal government has to step in, and this support will not stop," Raju Menon, managing partner of investment advisory firm, Morison Menon Chartered Accountant, told Gulf News.
REB, a federal government organisation with independent legal entity, subsidiary to the Minister of Finance and industry, was established in 1981 with a capital of Dh2 billion, subscribed in full by the government.
Eckart Woertz, an economist at the Gulf Research Center, said: "Abu Dhabi, as a main backer of the UAE government, is lending its credibility to Dubai's real estate sector by putting Amlak and Tamweel under the umbrella of the Real Estate Bank."
The federal government yesterday also decided to merge REB with Emirates Industrial Bank to create a stronger holding company that is expected to channel more funds into the UAE's real estate market.
It is, however, unclear how the new mergers will shape up and how the fundings will actually be channelled into the market. REB, as part of the government mandate, does not finance housing projects for expatriates.
"The REB was supposed to fund real estate for locals and now it is expanding and changing its role completely," Woertz observed.
While some analysts said the role of the two merged financing companies will continue to be the same as before, Woetrz said that due to the partial ownership by the federal government, the controlling rights of the latter would be seen.
While Tamweel and Amlak are the first companies to be rescued by the federal government, others might see similar action.
"There is a distinct possibility that we will see more involvement of government money in local markets like we've seen in Qatar," Woertz said.
Industrial bank: Merger approved
The Ministerial Service Council has approved the merger of the Real Estate Bank and the Industrial Bank into a new entity operating under the UAE Federal Government.
The move was made yesterday at the council's ordinary meeting chaired by Mohammad Abdullah Al Gergawi, Minister of Cabinet Affairs and Deputy Chairman of the council.