EXCLUSIVE: First bank repossession on Palm Jumeirah

Tuesday, 19 January 2010 6:55 AM

The Palm Jumeirah has witnessed its first property repossession, resulting in a bank selling an apartment for just AED745 per square foot – nearly 35 percent below the current market rate.

Arabian Business understands that a three bedroom apartment in Al Shala, on the prestigious development, was “taken back” by the owner’s bank last week after he failed to resolve Dhs1.7 million of outstanding debt.

“He left the country and gave power of attorney to someone else. The bank moved in quickly and asked for Dhs1.7 million, which they got within a few hours,” said a source close to agent involved in selling it.

The property was advertised by Networth Real Estate on the website of UAE daily Gulf News, at an asking price of AED1.7 million for a 2,280 square foot three bedroom apartment. When contacted, the agent said it had “gone immediately for cash".

It is thought to be the first time any bank has taken back a property on the Palm.

Just last week, according to Bloomberg, Barclays, Britain's second largest bank, has won the first foreclosure orders in Dubai, clearing the way for lenders holding about $16bn of Dubai home loans to take action when borrowers don’t pay.

Barclays said in an e-mailed reply to questions from newswire Bloomberg that it won the foreclosure orders, without providing details of the cases.

Similar properties on the Palm are currently being advertised close to AED1140 per square foot, nearly 35 percent higher than the bank’s selling price.

Provisions for bad loans in the UAE surged 68 percent by to 32 billion dirhams ($8.7 billion) as of November, compared with a year earlier, according to Bloomberg.

It said that Islamic lender Tamweel, the emirate’s biggest mortgage bank, has several of its own foreclosure claims pending and estimates about 3 percent of its mortgages are in default.

“Banks will be more aggressive in pursuing legal action if they see the process is efficient,” said Antoine Yacoub, a banking analyst at Moody’s Investors Service.

“They were trying to avoid the courts and restructure most of their loans, but once they see a precedent has been set, they will be encouraged to push more cases through.”

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Posted by: Shz Saturday, 23 January 2010 11:38 AM[UAE]

Thats a brilliant comment PD. So next time someone calls a house robbery as BAD, just ask him. Whats your problem ? are you UPSET because you did not rob the house ? Your brilliance amazes me :) Saying , its bank property and its upto them whatever they do with it is also defying logic. Banks are organizations that have to FOLLOW some rules. We are not talking about some individual BUT a bank !

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Posted by: Dubya Wednesday, 20 January 2010 1:45 PM[UAE] - UAE

As mentioned earlier there is a law to deal with reposessions which does not seem to have been followed (unless of course the article is inaccurate). so perhaps best to read the entire thread of comments before you comment. may i refer you to law no 14 on mortgages in dubai - its a good read

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Posted by: Caymankai Wednesday, 20 January 2010 10:18 AM[UAE] - Cayman Islands

As i see it if you borrow money from the bank to purchase a property then fail to pay back that money the bank is fully within its rights to reposses and sell IT'S PROPERTY. Why should the bank have to go to the trouble and expense of arranging an auction.

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Posted by: Alex_T Wednesday, 20 January 2010 9:41 AM[UAE] - UAE

Dear Shz, First of you have made a major wrong assumption, I do not work for any bank the exact opposite, I'm one the guys that have build these places and two(2) years later I'm still waiting to get paid. If I was to express my personal opinion of the banks and bankers alike, first of all it would not be published here and secondly all the banks would sue the pants of me. During the "good old days", the banks were chasing us to give us money we made due with our own, made money from our work and we are still here, maybe thinned out, less people etc but still here. Then your have the "investors" making money from the banks money.......... get the picture(and yes there are exceptions but there are the minority). I agree 100% bounced cheques/prison etc. it is the wrong way of doing business, it is just a very old protectionist system to safeguard the ignorant and take advantage of the gullable. Bottom line is that the bank/s have done the best for themselves within the limits of the law, if you have a problem with that please ask any taxi driver for directions to the Rulers court......

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Posted by: Rinus Wednesday, 20 January 2010 9:24 AM[UAE]

Common sense... 745 AED might be the right price for an upscale appartment on the Palm... You don't need to be an expect to see that the quality of most buildings is Dubai is ribbish. I believe prices in areas as International City, Discovery Gardens and even JLT... will come down to levels between 300 and 400 AED, for the better properties levels between 700 and 800 AED should be fair. Please note that if you end up buying a 2.000 sqt appartment on the Palm that you also commit to pay at least 20 AED per sqt services charges as year... this means 40.000 AED a year... not sure if this will ever be a good investment

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