Mashreqbank enters mortgage market
Abdul Aziz Al Ghurair, the bank's chief executive, says the home finance market is just too big an opportunity to miss.
Mashreqbank has made the decision to enter Dubai's home finance market, rather than wait for freehold ownership laws to come onto the statute book. The bank now offers mortgages on Emaar, Nakheel and Estithmaar's developments, at a rate of 6.49% until the end of 2004 and over a period of up to 15 years.
"We feel it is critical for us to participate in this sector," said Abdul Aziz Al Ghurair, chief executive officer of Mashreqbank. "We need it to complete our range of offerings to our customers."
The bank says it has entered the market now, rather than wait for foreign ownership of freehold property to become legal, because the opportunity is too large to miss out on.
It is also confident that the necessary legislation will be passed eventually. "We're told it is coming, we're told it will happen, I believe it will happen," said Al Ghurair.
Mashreqbank is now one of four institutions to offer financing on freehold properties, along with Dubai Islamic Bank, Amlak and HSBC. Mashreq is the first conventional UAE bank to offer mortgages, a move that may prompt banks that had decided to wait for legislation to also enter the market.
Mashreq's current interest rate of 6.49% is a symbolic 0.01% below the 6.5% that Amlak quotes in its sales brochure, and is also below Dubai Islamic Bank's fixed repayment rate of 7% over a five year term and 8% over ten years. The bank ask borrowers for a down payment of 20-30%, roughly in line with competitors.
After 2004, Mashreqbank's mortgage interest rate will be set at LIBOR plus 4.99%. The bank requires borrowers to take out home insurance through one of its subsidiaries and health insurance through any authorised provider.
The bank estimates that up to Dhs40 billion will be spent on freehold properties in Dubai over the next five years.