Middle East Mortgages: The Persian Gulf; This Second Part of a Two-Part Article about the Emergence of Thriving Mortgage Markets in the Middle East Documents a Surge in Demand for Mortgages in the Region

By Bergsman, Steve | Mortgage Banking, September 2006 | Go to article overview

Middle East Mortgages: The Persian Gulf; This Second Part of a Two-Part Article about the Emergence of Thriving Mortgage Markets in the Middle East Documents a Surge in Demand for Mortgages in the Region


Bergsman, Steve, Mortgage Banking


While the rest of the Middle East sorts out the finer points of the home-financing instrument known as a mortgage, the development-mad lands of the Persian Gulf have adopted the lending practice as if early desert dwellers along Dubai Creek always lived in suburban manses instead of rudimentary shelters. [??] In the 1950s, the small kingdom of Dubai counted about 10,000 residents who constructed small homes along an estuary of the Persian Gulf. Fifty years later, and now part of the United Arab Emirates (UAE), the oil-rich city boasts a population of about 1.5 million. But it's hard to get a real grip on how many people live there, as more and more immigrants flood in every day. A similar story is being told in places like Bahrain, Doha in the country of Qatar, and even other UAE population centers like Abu Dhabi. [??] In 2005, Dubai's economy grew around 16 percent and is estimated to have reached $37 billion at year-end 2005, reports Gulf Business magazine, published by Dubai-based Motivate Publishing. In addition, the construction component of Dubai's gross domestic product (GDP) grew from $4.8 billion in 2001 to $8 billion in 2004, says Dubai's Ministry of Economy and Planning. [??] Dubai is a city under construction. The statistic everyone likes to drag out is this: Almost one out of every four high-rise building cranes in the world can now be found in Dubai. [??] The story is almost the same in Doha. Once a sleepy backwater, the capital of Qatar now boasts about 50 high-rises and another 120 either under construction or planned. Some of these skyscrapers are office towers, some hotels, but many are residential dwellings.

[ILLUSTRATION OMITTED]

In Doha and Dubai, only one out of every 10 residents is a native. Such tremendous economic growth can only be accomplished with imported labor. The lower-end jobs are filled with Asians emigrating from the Philippines, Indonesia, India and almost everywhere else from the subcontinent. For skilled labor, especially in the financial trades, talent has been recruited from the United Kingdom, Australia and the United States.

The Mortgage Bankers Association (MBA), through its CampusMBA division, currently has a proposal to work in such Muslim countries as Saudi Arabia. A CampusMBA spokesman told Mortgage Banking he expected MBA would be doing training in other Middle Eastern states in the future, like it does in Egypt currently.

With the influx of professional workers and an expected shortage of rental housing, the government of Dubai issued a unique decree for a Persian Gulf state. In 2001, the Dubai government allowed expatriates to get a 99-year lease of Dubai property in designated areas. Then, in 2002, Sheikh Mohammed bin Rashid Al Maktoum, prime minister of the United Arab Emirates and emir of Dubai, followed that with a subsequent decree allowing foreigners to buy property on a freehold basis--also in designated areas.

Those decrees did two things. First, they unleashed an immense residential real estate boom in the region, and second, they created the genesis of a burgeoning mortgage industry.

Big numbers

If one drives along Sheikh Zayed Road, heading away from Dubai's central business district, it's hard not to notice what local folks brag is the largest billboard in the world. It reads: "ADCB: Now more people can own a home."

"Abu Dhabi Commercial Bank [ADCB] built it themselves on their own land," scoffs a rival mortgage company executive.

Competition in the nascent mortgage business in Dubai is already intense. "Currently, there are 16 mortgage lenders in the marketplace," notes Damian Hitchen, regional manager-home finance in the Dubai office of London-based HSBC Holdings plc. HSBC first dipped its toes in the Dubai mortgage market back in 2003, which is about when the first wave of mortgage products hit the local market.

It was about that time when Tamweel PJSC, a company focused on mortgage financing, was established in Dubai. …

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