Emirates Bank set to enter mortgage finance market

Emirates Bank International (EBI) which is in the process of finalising a mortgage finance scheme in view of the booming property market in the UAE, has come out with two special long-term deposit schemes.

"We believe it is our duty to help investors in the property market with our finance scheme. The rates and other details of the mortgage finance will be announced once the scheme is finalised," said Louis Scotto, general manage (retail), EBI.

With leading property developers like Emaar, Palm and Jumeirah Beach Residence announcing aggressive marketing programmes during the recent few weeks, banks like National Bank of Dubai (NBD) and Dubai Islamic Bank (DIB) announced that they would enter mortgage finance.

According to sources, more banks are lining up to enter mortgage finance. Already, Amlak Finance has a scheme to offer finance against property up to 25 years.

Meanwhile, the deposit schemes launched by EBI are linked to underlying AAA-rated securities issued by IBRD (World Bank) and other supranational entities.

While a five-year fixed deposit scheme offers a maximum interest of 5 per cent, the three-year deposit scheme offers a maximum rate of 4 per cent.

Both schemes offer 2.5 per cent interest for the first year and a step-up rate in the subsequent years. Though the schemes are currently offered in dollar as well as the local currency - dirham, EBI doesn't rule out the possibility of launching such schemes in other foreign currencies like euro, yen etc in the future.

The schemes for which the minimum subscription has been fixed at $5,000 or Dh20,000 and multiples of $1,000 and Dh5,000 respectively thereof, have a limited offer period between September 1 and September 30.

The scheme will be open on a first-come first-served basis. The interest payment will be semi-annual, on April 1 and October 1 each year, commencing April 2003.

EBI has announced a loyalty bonus of 0.5 per cent (flat) for the three-year scheme and 1 per cent (flat) for the five-year scheme, provided the special deposit is not repaid prior to the maturity dates.

Briefing on the new schemes, Suresh Kumar, general manager (investment banking) in EBI stated that, following the launch of its VIP Banking unit (V Bank), a number of special schemes will be offered for subscription.

Suresh Kumar clarified that despite the prevailing interest rates on short term deposits of less than two per cent, the higher rates have been made possible by a special structuring of highly rated securities and incorporating an interest rate view.

As the underlying securities have a possibility of premature redemption, the bank may call or redeem the deposits, in part or in full, on any interest payment dates.

"By keeping deposit schemes simple and introducing new features such as the loyalty bonus and step-up interest rates EBI will be offering attractive solutions to its varied customer requirements," said Louis Scotto.

Suleiman Mazroui, chief manager, marketing, said that given Dubai's prominent role in fostering capital markets, the establishment of the DIFC and the honour of holding the World Bank/IMF meetings in Dubai in September 2003, such product offerings will enhance the image of the banking and financial system.