City of the future

Abu Dhabi's mortgage market has blossomed over the past few years and many home finance schemes are available.

Over the last few years the UAE mortgage market has witnessed unprecedented growth as a result of the new property laws issued in Dubai and Abu Dhabi. According to Iris Dinu, Associate Director of CB Richard Ellis, "There are currently 23 lenders offering home finance to individuals and companies in the UAE market. This number has grown considerably since the introduction of the freehold property market four years ago. The mortgage providers are a combination of local and international banks and mortgage houses. Estimates from the UAE Central Bank suggest that around Dh50 billion has been lent so far by several home financiers in the UAE."

Expanding mortgage market

At Cityscape 2007, Adel Al Shirawi, CEO of Tamweel (one of the leading home financers in the UAE), said Abu Dhabi, with its healthy GDP, new property laws, high liquidity, strong foreign direct investment, new lifestyle attractions, environmentally sustainable developments and availability of commercial space, is very much a city of the future. "Today, the real estate market in Abu Dhabi is served by three pure mortgage players and seven banks, which are working to meet the steadily increasing demand for both home finance and commercial development in this young vibrant market," he said. Besides Amlak and Tamweel, the Abu Dhabi Commercial Bank and the National Bank of Abu Dhabi are some of the major players in the emirate.

"Mortgage schemes have been tailored for UAE residents and non-residents for retail, residential and investment purposes. Due to the recent boom in freehold and leasehold properties in Abu Dhabi, both residential and office property markets have seen significant growth. As a result most of the local and foreign banks have increased their activity in the mortgage market, expanding their services to UAE nationals, expatriates and non-resident customers.

Local banks

The local banks, in fact, are heavily involved in new mortgage business by offering very flexible mortgage services with very attractive features. Foreign banks have entered the market on a smaller scale by providing mortgages on a case-by-case basis with little competitive schemes," says an official spokesperson of the National Bank of Abu Dhabi.

The ESCAN loan from NBAD is offered for property ownership, maintenance and extension. ESCAN is offered to UAE residents and non-residents with very attractive and competitive features, such as 'mini' downpayment of 10 per cent, maximum loan amount of Dh8 million and a maximum tenor of 25 years.

NBAD has also tied up with many master and well-known developers, offering them special schemes like lower interest rates, competitive fees and charges. According to a NBAD spokesperson "Regarding Sharia-compliant mortgages, NBAD will be launching in the near future the new Islamic mortgage scheme under its new subsidiary Abu Dhabi National Islamic Finance Company."

According to Shirawi, Tamweel works with leading property developers in Abu Dhabi like Sorouh, Manazel, Al Qudra, Al Dar and others.

Sharia-compliant offers

"Islamic principles are the cornerstone of Tamweel's products and, therefore, all our products are Sharia-compliant. We offer a variety of customised financial options targeting affordable as well as premium properties. One of the most innovative products and also an industry first is Yusr — the first-ever Sharia compliant adjustable repayment mortgage option. It enables customers to start with lower instalments for a selected period in the initial years. When the Yusr period is over, the instalments are adjusted to accommodate the partial installment deferral. Our other products and services include Soyoula, pre-approval finance facility, flexi Ijara and Baiti," he said.

Tamweel has also originated a $210 million asset-backed securitisation that was successfully placed among European investors. These notes were the world's first tiered securitisation structure for Islamic assets, and received the highest ratings assigned by international rating agencies for securitisation by a UAE-based institution.

One of the other important players in the Abu Dhabi mortgage market is ADCB, which offers mortgage services for a 25-year tenor and loan to value up to 90 per cent at affordable interest rates.

"In addition, as a special feature, we also offer refinance services wherein customers can borrow against the increased value of their homes for their other needs. The other variant which was recently launched is mortgage overdraft, where there is servicing of interest only on a monthly basis. Our plan in the near future is to create competitive and attractive financing packages, appealing to different segments. We do not offer Shariah compliant mortgages, but are exploring the concept and will be introducing the same in the near future," says Sundar Parthasarathy, Head of Retail Asset of the Abu Dhabi Commercial Bank.

Although the mortgage contracts in the UAE still need further refinement in order to cover all aspects of purchase, agreements, declaration and restrictions, Abu Dhabi's growing property market will continue to influence its mortgage market.

Competitive prices

"Abu Dhabi is witnessing enormous developments on the real estate front and the current prices look affordable and competitive as compared to other western markets. This is an excellent opportunity for first time buyers to substitute rents by owning a property with plethora of mortgage services offered by various banks," says Parthasarathy.