Amlak Finance PJSC, the United Arab Emirates’ biggest mortgage lender by market value, temporarily stopped granting new home loans as the global credit crisis threatens Dubai’s property market and pushes mortgage providers to restructure.

“We are reviewing our existing credit policy to ensure optimum servicing of existing and prospective accounts,” Dubai-based Amlak’s Chief Executive Officer Arif Alharmi said in an e-mailed response to questions from Bloomberg News.

Dubai, home to the world’s tallest building and the man- made Palm Island in the Persian Gulf, is bracing for a slowdown in the property market as economic growth slumps and oil prices fall. Dubai is considered the most vulnerable place in the Persian Gulf to lower oil prices as real-estate and debt financing pose risks, Citigroup Inc. said today.

Outstanding mortgage loans in the U.A.E. almost doubled in the year through June as property prices soared to a record. Mortgage loans leaped 92 percent to 87.6 billion dirhams ($23.8 billion), compared with annual growth of 55 percent in March, the central bank said yesterday.

Amlak hasn’t stopped facilitating home purchases and “our temporary measures of not sourcing new applications will bring us up to the level we have outlined in our management strategy at the beginning of the year,” Alharmi said in the statement.

“Not Sustainable”

HSBC Holdings Plc and Lloyds TSB Group Plc, two of the largest U.K. banks operating in the U.A.E., said Nov. 11 they would tighten mortgage lending criteria in the Gulf state. Dubai property prices, including villas and apartments, fell 4 percent in the month to October, while in Abu Dhabi they declined 5 percent, HSBC said last week.

Amlak and Tamweel PJSC, the second-largest mortgage provider, may need access to retail deposits after U.S. mortgage finance companies Fannie Mae and Freddie Mac’s seizure by the U.S. government in September.

The mortgage industry “as a business model has been challenged all over the world,” Nasser bin Hassan Al Shaikh, Amlak’s chairman, told an Emirates NBD PJSC bankers’ lunch today. “We are working very closely with the Central Bank and the Ministry of Finance. And you will see some changes there.”

Amlak and Tamweel’s “business plans are not sustainable and have to be changed,” Al Shaikh said. “These companies need to have access to retail deposits. They don’t have to become banks but something similar to the savings and loans model in other countries.”

Amlak gained 2.9 percent to 1.08 dirhams, valuing the company at 1.62 billion dirhams. Tamweel declined 1.9 percent to 1.05 dirhams.

Source: Bloomberg by Glen Carey and Arif Sharif

Related posts:

1. Gulf market snubs proposed Amlak, Tamweel tie-up
2. Dubai’s Amlak, Tamweel to speed merger amid crunch
3. Is It Time For Dubai Property Developers To See Sense?