Tamweel and Amlak growing closer

Tamweel and Amlak are working closely together with the Government to access liquidity for their planned merger.

DUBAI // Tamweel and Amlak, the UAE's two largest mortgage lenders, say they are "working closely" with the Government to access liquidity and funding alternatives for their planned merger. "The two parties have continued to progress merger discussions, and have also begun consultation with key stake holders, including the Investment Corporation of Dubai, a representative of the Government of Dubai," the companies said in a joint statement to the Dubai Financial Market (DFM), where their shares are traded.

The companies said more details would be revealed soon. Tamweel and Amlak on Oct 4 announced plans to merge by early next year and create the largest home finance company in the region. "All key stake holders have reaffirmed their strong support for a potential combination of the two entities," the statement read. "Combined together, the two companies will be better positioned to drive growth in a highly attractive and under-exploited segment of the market."

Financial institutions in the region are under pressure from the global credit crunch, with many cutting back on the amount they are willing to offer home owners. Home financing, a relatively new sector, has grown rapidly in the past few years. According to estimates, the market is worth about Dh60bn. Some analysts have predicted a decline in growth in the next year as tight liquidity makes it harder for companies such as Tamweel and Amlak to operate due to their reliance on the credit markets for funds and investment.

The two have the lion's share of the country's mortgage market, followed by commercial banks including Emirates NBD, Abu Dhabi Commercial Bank and international players such as HSBC. Many home finance firms have already cut the amount they are prepared to lend on a property to 75 per cent, down from 90 per cent. "The two companies form an integral part of the Government of Dubai's Strategic Plan and are of critical importance to the economic development of the UAE, particularly its real estate sector," Mohammed Ibrahim al Shaibani, the chief executive of Dubai Investment Corporation, said in the joint statement.

"Amlak Finance and Tamweel have been instrumental in developing the UAE housing finance market and have a strong track record of bringing innovative products to meet the needs of the market." The merger between Tamweel and Amlak could also create the region's newest Islamic bank, as both companies are awaiting approval of banking licences from the Central Bank. Industry sources say these applications could be rolled into one because of the possible merger.

Granting of the licences would enable the companies to take deposits and provide the merged entity with a reliable source of financing. "If they jointly apply for a banking licence, it could strengthen them both and encourage them to lend more," the head of an Abu Dhabi-based asset management company said last week. A banking analyst said the companies would be much more likely to be granted a licence now, given the uncertain state of the home lending market.

Two weeks ago, Nasser al Sheikh, the chairman of Amlak Finance, told Reuters that the market was becoming "more challenging", although it did not impede his company's ability to borrow. The company also denied at the time that it was having trouble accessing funding. [e-mail]