Bank launches mortgage for non resident high net worth individuals in UAE

Written by Ray Clancy

Thursday, 29 July 2010 09:38

Standard Chartered Bank has launched a unique mortgage facility which offers foreign property investors a customised approach to loans of up to $5 million for buying in the United Arab Emirates.

It is specifically aimed at affluent and high net worth individuals. But there are strings attached as those wishing to take out a loan are restricted to buying either new or existing properties by one of the bank’s registered developers.

It is being introduced as a direct result of customer demand, according to the bank. Its research highlighted the fact that the affluent and high net worth market did not have access to a mortgage offering that met with their needs.

Standard Chartered Bank says it is the only financial institution in the market offering such a high loan amount to non-residents.

‘We have shifted from a product focus to being more customer focused and as a result we have been developing better service and product packages based around our customers’ needs rather than adopting a one size fits all approach. Through this strategy, we have built up great momentum and are maintaining this growth by continuing to invest in our business and through the development of products like this one,’ said David Inglesfield, regional head of private banking for the Middle East and North Africa.

Properties built by Emaar, Nakheel, Dubai Properties, Union Properties, World Trade Center Residencies, Aldaar, Al Barari, Sorouh, TDIC, Victory Heights, Manazel, ETA Star, IFAA and Zabeel can be purchased under the mortgage agreement with more developers to come on board, the bank added.

But the announcement comes as Fitch Ratings warns that Dubai’s real estate sector could experience a double dip contraction. The global ratings agency said it’s likely the market in Dubai will remain under pressure, at least until 2012/2013, and therefore corporates may face significant refinancing risks given upcoming debt maturities next year.

‘Despite signs that conditions may be stabilising, as well as a recent round of debt restructurings and extensions, Fitch believes that the credit outlook for the sector remains negative,’ said Bashar Al Natoor, director in Fitch’s EMEA Corporates team.

‘The sector is likely to see a period of stagnant growth at best, and a double dip contraction at worst,’ Al Natoor added.

Without a significant improvement in market conditions, sizeable disposals or additional equity raising, and significant government support, it is unlikely that developers will deleverage quickly enough to repay the upcoming 2011/2012 maturities from internal resources,’ it said.

While the world economy is slowly recovering from the downturn, Fitch expects Dubai’s real estate and construction fundamentals to continue weakening, with increasing customer
delinquencies, limited liquidity, and a continued historical reliance on short term maturities.

Oversupply, limited mortgage availability and rising interest rates will also pose significant
constraints for real estate companies and buyers,’ it added.

The availability and the cost of debt for Dubai, and subsequently the corporate sector, is also likely to deteriorate and result in investors demanding higher risk premiums. This trend is already being reflected in credit default swaps, which have increased in the GCC states, with Dubai being the worst affected.