Emirates NBD, the biggest bank in the Middle East by assets, entered the Abu Dhabi mortgage lending market for the first time yesterday. "The Abu Dhabi real estate market is at an all-time high with a series of freehold developments being introduced to the market," said an executive of the Dubai-based bank. Emirates NBD's entry into the capital is another sign of Abu Dhabi's mortgage market maturing, although the majority of available properties remain off-plan and yet to be built.
The majority of banks covering the Abu Dhabi market are based in the city. The two largest UAE mortgage lenders, Tamweel and Amlak, are also looking to grow their portfolio. "Abu Dhabi is still an emerging market because properties are more recent and sales have started in 2007 to 2008," said Nabil Abou Nalwan, the head of marketing at Tamweel. "And usually, the mortgage market follows one or two years after. We consider the Abu Dhabi market as solid and prone for big growth."
While banks show general bullishness, a Merrill Lynch industry overview earlier this month warned that Abu Dhabi banks had been "performing badly" during the first half of the year and that "investor appetite had fallen due to the heightened risk aversion regarding the UAE property market and funding constraints at banks". According to analysts, loans in Abu Dhabi grew by 31 per cent in the first half of the year compared with 13 per cent deposit growth. "Growing exposure to the Gulf's overheated real estate sector is a growing concern for banks," the report said.
Mortgage providers, however, have their own precautionary policies. "Our rate policies are different for off-plan properties," said Suvo Sarkar, the general manager of retail banking of Emirates NBD. "We provide up to 90 per cent of the value of off-plan properties from the top developers. As for the secondary market, we only give financing [based on] the original property value. We don't do premium financing of off-plan properties.
"If you buy an off-plan property for Dh5 million and in changing hands it goes up to Dh6m, we will finance up to 90 per cent of the Dh5m. Once it is completed, we will get a complete revaluation through a valuation company and we will give you a percentage of it. We do not want to finance speculation." The bank will initially finance properties from the two main government-backed Abu Dhabi developers, Aldar and Sorouh. "There will definitely be a few more than that," Mr Sarkar said. "We are looking at the developers' reputation and background."