Abu Dhabi’s five largest companies: Mubadala Development, Abu Dhabi Commercial Bank, Aldar Properties, Sorouh Real Estate and the Tourism Development and Investment Company, will launch a home finance company on Wednesday, reported The National today.
The new lender, known as Abu Dhabi Finance will begin operations with Dh500 million (US$136.1m) in paid up capital, purposed to facilitate mortgages to buyers of properties from the three developers. The size of their developments jointly account for two thirds of Abu Dhabiâ€™s projects. The new lender will expand to other emirates in future.
Recently few banks and finance companies, such as HSBC, Loyds TSB and ENBD ,revised their lending termsÂ and for property investors become difficult to buy a home. Amlak Finance stopped issuing loans while it reviewed its credit policy.
To easy the real estate market stagnation, the Abu Dhabi Finance will begin offering mortgages with loan-to-value ratios as high as 85 per cent immediately.
Abu Dhabi Finance will be oriented towards end-users and will facilitate the demand in the property market for reasonable mortgages. Its financial products will resemble other lenders offerings. The duration of the mortgages offered will range from 3 to 30 years. The borrower must be under the age of 70 when the mortgage ends. They will have a debt-to-service ratio of 55 per cent. The interest rate on the loans, between 8.5 per cent and 9 per cent, was about as expensive as others in the market, mortgage brokers said.
Together with the newly announced Emirates Development Bank, it would also bring some liquidity back to the suffering property market and restore confidence in UAE’s business model.
The Government announced this week that Emirates Development Bank would be formed by the merger of Real Estate Bank, Emirates Industrial Bank, Amlak and Tamweel â€“ making it the largest provider of home loans in the country and a facility that could directly help distressed property developers.
Abu Dhabi Finance had its financing secured and would be able to get through any â€œrough situations that come to the market. The competitive advantage for its 70-person operation â€“ based in the Abu Dhabi Commercial Bank building on Zayed the First Street â€“ would be customer service, he said.