Tamweel resumes property lending

Tamweel will begin offering loans again in Abu Dhabi and Dubai after a two year freeze.

Tamweel, one of the UAE's biggest duo of Islamic mortgage lenders, is back in business after a two-year freeze.

The company, listed in Dubai, will start offering home loans today to customers in Dubai and Abu Dhabi, it said. It will offer up to 80 per cent financing, although with a "renewed focus on prudence and conservatism".

While its return to the market has been anticipated since Dubai Islamic Bank (DIB) acquired a controlling stake last September, the relaunch marked a milestone for the emirate's economic recovery and was a watershed moment for Tamweel in its bid to resuscitate its ailing home financing business.

Tamweel's return is also a symbolic victory for Dubai's property market, where average prices have fallen by more than 50 per cent from their peak in 2008.

But executives would not say how much money Tamweel plans to deploy in its new round of lending, which analysts said made the actual effect of the company's return hard to gauge.

Tamweel has about Dh11 billion (US$2.99bn) of mortgages, rather less than the Dh14bn portfolio of Amlak Finance, the country's other major Islamic mortgage company. Together they comprise a significant chunk of the UAE's mortgage market, estimated last year to be worth about Dh60bn.

"This is absolutely needed in the marketplace right now," said Nicholas Maclean, the head of the regional office of the property consultancy CB Richard Ellis.

"There are buyers here that want to proceed but they don't have the means to get back into the market. This will allow them to get transactions going again."

Tamweel's indication that it would give out mortgages for as much as 80 per cent of the value of a home was a sign that it was hoping to make a major impact on the market, said analysts. Mortgages have only begun to creep up towards that level after two years of depressed prices.

"The impact this will have depends on Tamweel's ability to lend," said Damian Hitchen, a director at the mortgage service company Emirates Conveyancing. "But with this announcement, we now have the most competitive set of offerings in the market than we've ever had."

Mr Hitchen said more competition was pushing interest rates below 6 per cent in some cases.

New mortgages have been steadily on the rise over the past year as prices declined at a slower rate. Standard Chartered, Barclays, RAK Bank and HSBC are also increasing lending.

"While the past two years have been extremely challenging for the company - during a period of unprecedented turmoil in the global real estate and financial services sectors - we have persevered," said Varun Sood, the chief executive of Tamweel home financing.

Tamweel encountered problems in November 2008, because of its reliance on loans from banks and investors to finance its business. With no base of customer deposits to tide it over, the company had to quickly suspend lending when conditions worsened in credit markets and property prices dropped.

A government panel was formed in late 2008 to work out a merger between Tamweel and Amlak. The plan was ultimately scrapped.

DIB, the UAE's largest Sharia-compliant bank, raised its stake in Tamweel to 57.3 per cent in September. Tamweel did not say when or if trading would resume, and a spokesman said that decision was up to the Government.