Abu Dhabi real estate and finance houses create joint lender

The new mortgage provider will begin by servicing developments that are exclusively based in Abu Dhabi, with plans to expand its scope to the rest of the UAE further down the line.

Mubadala Development Company, one of Abu Dhabi Finance's big five backers, is the emirate's government-backed investment house, while Abu Dhabi Commercial Bank is one of the biggest banks in the UAE.

Aldar, Sorouh Real Estate and the Tourism Development & Investment Company (TDIC) combined represent an estimated two thirds of the new real estate units currently being built in the city.

Initial capital

Abu Dhabi Finance will begin operations with an initial capital amount of Dhs500m ($137m) and, having been in the pipeline for the past 12 months, opens its doors with a range of mortgage products.

'Our shareholders have recognised for some time that the increasing demand for real estate in Abu Dhabi means there is a greater demand for mortgage financing,' said company chairman Ali Al Mehairi in a statement.

'Abu Dhabi Finance will provide liquidity to a market where demand remains high for property. As an Abu Dhabi business, our primary focus is on servicing the needs of this Emirate. Demand for real estate in Abu Dhabi and our first priority is to help meet that demand.'

'We're aiming to become the leading supplier of mortgage products in Abu Dhabi, servicing this growing market as it continues to develop,' added CEO Philip Ward.

The new lender will offer mortgages of up to 85% of the property's value, compared to current market rates of between 50% and 70%, and debt-service ratios of up to 55%.

Amlak and Tamweel consolidate

The opening of the new lender comes at a time when the UAE's main property driver, Dubai, is suffering from a major lack of liquidity and fall out from the current credit crisis.

The country's largest lender, Amlak Finance, recently stopped underwriting new mortgages and last week announced a merger with rival Tamweel under a government-backed scheme to bring the home finance houses under the aegis of the Emirates Development Bank (EDB). The EDB also includes Emirates Industrial Bank and UAE Real Estate Bank.

The UAE has the highest mortgage penetration of GCC states, averaging out at approximately 10% of 2008 GDP, compared to the Gulf average of 4%. Moody's places the mortgage potential of the UAE at almost $135bn in the long term.

See also:
Will Abu Dhabi beat the global financial crisis?
Abu Dhabi developers change focus to suit financial constraints