Property chief sees Amlak, Tamweel merger 'going ahead'

Thursday, 9 April 2009 6:36 AM

The chairman of Damac Properties has said he is confident the merger of the two biggest mortgage lenders in the UAE will go ahead.

Amid recent uncertainty over the deal , Hussain Sajwani, who founded developer Damac in 2002, predicted the government-brokered deal to merge troubled lenders Amlak and Tamweel would happen, after shares in the two companies were suspended last November.

“It’s happening, it’s a matter of time. I hear they are going ahead,” Sajwani said in an exclusive interview with Arabian Business.

His comments come amid doubts surrounding the $1.6bn merger after Sultan Bin Saeed Al Mansouri, UAE Minister of Economy, said in February that the deal was not "definite".

A UAE government committee has completed its review into the merger and is due to outline its recommendations in its final report.

Any tie-up between the two lending giants would help kickstart the UAE mortgage market and would be the biggest since Emirates NBD was formed last year in an $11.3bn merger between Emirates Bank International and National Bank of Dubai.

Sajwani also expressed surprise over the severity of the property downturn in Dubai.

He said he had expected a ‘soft landing’ and a correction, rather than a "harsh landing" that has led to mass cancellation of projects, plummeting prices, and a severe liquidity crunch putting a squeeze on financing.

A month ago, property adviser Jones Lang LaSalle said over 50 percent of projects due for completion between 2009 and 2012 are either on hold and have been cancelled, but Sajwani said Damac had not cancelled any of its projects and was not planning to.

“We were expecting a correction in the market in 2009, we were ready for it. Because of the international crisis and what happened in America, the landing was harsh. Prices have dropped, the confidence in the market has been shaken,” he said.

One of the most respected voices on property in the Middle East, Sajwani said speculators had piled into market, artificially inflating the price of property in the emirate.

“In 2008, the market went up, prices went too fast, too quick and too high, and all the speculators jumped in and fed the market higher and higher.”

Prices and rents had come down on average by 20 to 30 percent depending on the project, he said, but the market was "close to the bottom" and values would remain flat in 2010 before rising again in 2011.

Sajwani said he was still interested in taking Damac public and listing in Dubai, although stressed this was dependant on market conditions.

He confirmed Damac had shed just under 300 jobs globally since November and that the group does not plan to make any more culls.

The company announced it had cut 200 positions in November and a further 50 in February.

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Posted by: The Brand Sunday, 12 April 2009 12:55 PM[UAE]

I rally don't understand ArabianBusiness any more!!! Trust is what missing right now & what peolpes are looking for.... Sajwani is not in any position to give a true & clear feedback about the current situation & he is bias by far as he own one of those companies that they where part of this disaster to the market.... We just need some report from a decent unbiased peoples.

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Posted by: jackfruit Thursday, 9 April 2009 4:23 PM[UAE] - UAE

I agree with Graham. What's the point of alligning 2 companies when the interest isn't there anymore. This is happening too late. I am still not sure if this will save the real estate doom. There are more and more banks saying that they are willing to give loans at hgher LTV ration of 70% of property value, but the values are already down by 30% so in actual terms they are just giving loans of 50% of property value. Besides the interest rates are still so high on all types of loans. Not only home loans. The banks should make it easier for someone to pay back at times like these. Not put so much burden that people turn their loans toxic for the banks. Some banks say that the loans are insured in case the people don't pay up. I'd say why not think long term. If the people stay here to pay back your loans you will still have your jobs. Or one day you will have got your money back because its insured but no your jobs, are you insured against that? one bank I deal with for my personal loan, I called them to ask if I can make a part pre-payment towards my outstandings, they turned around and told me that I would have to pay a penalty for doing that. I was shocked. I asked why? They said that its bank policy. After much explaination about how difficult it is for the rest of us to recover our dues, and here I am trying to give you back a higher than the promised amount and earlier than the bank expected. He said that I should talk to somebody at the banks Recovery Dept, may be they could help. Huh? Where do these guys stick there heads in when there is this storm outside. I still hope that no matter who merges with whom, untill the interest rates are lowered for the end user and the LTV increased above 85% on today's prices. You will find very few takers. For example, today to be able to buy a Dhs 1.5 million apartment with bank finance (HSBC) one still needs to shell out, 450K down payment isn't that a steep one. I can't see too many people with that kind of cash in their pockets. If its 15% then they would only need 225K and that means so many more people can afford to buy. And this is just an example of 1.5m apartment there are a whole lot more expensive apartments and villas out there. Who is going to buy them. Unless Amlak/Tamweel launch with their well known 5% Down Payment offer. Who knows they just might. Also the interest rate should be lowered just like in the US. If they do, I've got my cheque of 5% ready and I know many more who would be ready too. Then, there is a good chance that things can get better. Let's wait and watch. Inshallah.

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Posted by: Graham Thursday, 9 April 2009 2:52 PM[UAE] - UAE

Merging 2 organisations that have financial problems does not solve anything. as a Tamweel customer currently paying 8.4% profit rate for a UAE dirham mortgage, when the dirham is pegged to the dollar and dollar interest rate are below 4% shows you that this is not a good deal for UAE mortgage customers. so these companies are unable to borrow at the amazingly low (less than 2%) dollar interest rates available worldwide because nobody wants to lend to them and instead they borrow money locally at close to 6% and ask their customers to fund their borrowing... they need liquidity not a merger, both are effectively government owned and the Govt cannot provide financing for them either. so what is the point of a merger ? what we need are international banks who are prepared to offer dollar based loans for UAE property at current dollar interest rates of 4% or less, which will get the real estate markets in the GCC moving again.

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