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Thu 18 Oct 2007 05:57 PM

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Amlak invests $700mn in Dubai business park

UAE Islamic lender says it will sell mortgages on offices to supplement home-loan business.

Amlak Finance said on Thursday it invested 2.6 billion dirhams ($708.1 million) in a Dubai business park and would sell mortgages on the offices to supplement its home-loan business.

The property cost Dubai-based Amlak, which is losing market share to banks, about 20 times its annual profit in 2006. The company, which complies with Islam's ban on lending on interest, had assets worth about 7 billion dirhams on September 30.

Amlak would pay for the property, with 1.8 million sq feet (167,200 sq metres) of office space, in instalments, Chief Executive Arif Al-Harmi told Reuters.

"It complements our business because we will package and sell it as mortgages," he said.

The mortgage sales would go towards paying for the investment, Harmi said, without giving details of when the payments would be completed.

Amlak is on track to sell $260 million of sukuk, or Islamic bonds, backed by mortgages this year and is considering more sukuk sales next year, Harmi said.

A global credit crunch in July triggered by defaults on US home loans prompted some Gulf borrowers to shelve or postpone bond plans.

"It's definitely this quarter," Harmi told Reuters in Bahrain.

The mortgage lender had said it would sell the bonds, or sukuk, by the end of the year to pay for foreign expansion.

The firm has operations in Saudi Arabia and Egypt, and is eyeing Qatar, Jordan and Bahrain for further expansion, with one of the three markets likely to be chosen this year, Harmi said.

The company made a profit of 130.42 million dirhams last year and says it aims to grow that by 70% this year.

Amlak posted its second biggest quarterly profit ever in the third quarter, doubling over last year, as it lent more and cut borrowing costs. It beat analysts' forecasts.

Dubai gave Amlak and rival Tamweel permission to hold money in trust for clients of property developers, giving the lenders access to cheaper funding.

Both mortgage firms lost market share in the year to March 31 to banks, which expanded their home loan business to meet surging demand, National Bank of Abu Dhabi said in August.

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