UAE lenders expect to see rising mortgage defaults

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MORTGAGE DEFAULTS: The economic crisis has seen more people defaulting on their mortgage payments.

Mortgage defaults are expected to rise in Dubai this year due to the global downturn, Amlak Finance, an Islamic lender being rescued by the government, said on Tuesday.

"We are experiencing more delinquencies in terms of mortgages in 2009 and it will be very challenging to manage going forward," Max Hamidi, chief financial officer at the Islamic mortgage firm, said at a conference.

"The default on mortgages is growing and it will probably grow further," he said.

Dubai's real estate indsutry saw prices tumbling 41 percent in the first three months of 2009, according to property consultants Colliers.

The slowdown has led to billions of dollars of project cancellations.

A decision on how to restructure troubled Islamic mortgage firms Amlak and Tamweel will be made in "weeks", Tamweel's chairman said late last month.

Trading in shares of both companies has been halted since the government announced in November it was merging them with two state-controlled banks.

The Islamic home financing companies developed their businesses during an economic boom that was kicked off by the emirate's decision in 2002 to allow foreigners to invest in properties on a freehold basis. (Reuters)

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READERS' COMMENTS

Greedy Banks responsible for Mortgage defaults
Posted by MK, Dubai, United Arab Emirates on Tuesday 26 May 2009 at 11:04 UAE time


It is not that a customer wants to default but it is the greed of bank and their non-listening attitude to acknowledge and resolve a problem that makes the customer in that vulnerable position since he is left with no other choice. RAKBANK has given a mortgage to me via wrong communication and misinformation by its employee just because he wanted to make a sale of property owned by the bank. Not only this, they have also charged wrong fees in respect of this sale.I brought the matter of all miscommunications to the bank and provided them with all available evidences but all went on deaf ears and they are not at all ready to listen to me and provide any help. However they have sacked their employee.Is this an ethical business?? You are left with only two choices either to go to court (which is very expensive OR to default !!).Is there anyone to listen to these problems?? Govt. must do something to deal with such cases to reduce the ongoing problems. There should be a dispute redresal committee (like Rent committee) to listen to the greviences and resolve outside the court.

To Justine.
Posted by Mohammed, UAE on Thursday 7 May 2009 at 09:22 UAE time


This country is not governed by Sharia Law. If it was noone would not have been able to take out a loan on interest in the first place. I have read in an Islamic Books on Sharia that according to the Shariaa if a man goes to his neighbor and borrows 1 million dirhams at 10% interest payable in a year and signs a contract promising he will and then in a years time should he only pay back the capital and the neighbor take him to court and present the contract which he signed promosing to pay the 10% interest ontop of the capital ... the court would rule that the contract is invalid and unenforceable because it contains interest which nulifies its legitamacy. The court can force the man to pay the capital but cannot force the man to pay the interest just as they cannot force the man to drink alcohol or fornicate just because he signed a contract saying that he would. That is the justice of Shariaa law.

The Messenger of Allah (Peace be upon him) said: "Riba is of seventy different kinds, the
least grave being equivalent to a man marrying (i.e., having sexual intercourse with) his own mother."

Mortgage Defaults
Posted by macca on Wednesday 6 May 2009 at 19:36 UAE time


Increase interest rates, increase the defaults. But if we dont pay our mortgages we will go to jail, so we have to pay. Every ex pat has always had a "Plan C". Its called go home !! Defalts are already through the roof in Dubai, this summer see a tidal wave unless interest rates are dropped in line with the US. We have a saying in the west : greedy pigs are the first to be slaughtered because they are the fattest.

Greed
Posted by Justine, Dubai on Wednesday 6 May 2009 at 18:22 UAE time


I can't believe in a recession that they are still increasing the interest rates - it just shows sheer greed. Where's the transparacy that Sharia Law is supposed to provide? Every other country lowers the mortgage interest rate to help the economy, but as usual it's take, take, take, take in Dubai and then they wonder why they have a problem.....

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