Dubai firms to take trust deposits
Dubai mortgage firms Amlak Finance and Tamweel have been given permission hold money in trust for clients of property developers, giving the lenders access to cheaper funding.
A new Dubai law requires developers to place funds for projects in escrow, or trust, accounts, until the developments are at least partially completed to protect investors from construction delays.
Tamweel and Amlak said the move would improve investor confidence in Dubai's construction sector. Amlak, the larger of the two, saw it as step toward becoming an Islamic bank.
Both firms have lost market share to banks, the National Bank of Abu Dhabi said last week, and Amlak is waiting for central bank approval to operate as an Islamic bank to so it can take deposits, a cheaper source of funding than loans or bonds.
Tamweel and Amlak offer mortgages that comply with Islamic law, which bans interest, equating it with usury.
"We think the funds mobilised through these trust accounts will be a very significant source of funds for Amlak going forward," Amlak Chairman Nasser al-Shaikh told Reuters.
"I think it (escrow accounts) takes us a step closer, but converting to an Islamic bank requires central bank approval, which we are still waiting for," he added.
The new Dubai law allows Tamweel and Amlak to take deposits from developers, but not individuals.
Nasser said he was seeking permission to operate as an Islamic bank to take deposits from retail customers and to meet growing demand in the region for Islamic finance products, especially mortgages.
The value of outstanding home loans from banks surged 86% to 42 billion dirhams ($11.44 billion) in the year to March 31, central bank data showed.Source
A new Dubai law requires developers to place funds for projects in escrow, or trust, accounts, until the developments are at least partially completed to protect investors from construction delays.
Tamweel and Amlak said the move would improve investor confidence in Dubai's construction sector. Amlak, the larger of the two, saw it as step toward becoming an Islamic bank.
Both firms have lost market share to banks, the National Bank of Abu Dhabi said last week, and Amlak is waiting for central bank approval to operate as an Islamic bank to so it can take deposits, a cheaper source of funding than loans or bonds.
Tamweel and Amlak offer mortgages that comply with Islamic law, which bans interest, equating it with usury.
"We think the funds mobilised through these trust accounts will be a very significant source of funds for Amlak going forward," Amlak Chairman Nasser al-Shaikh told Reuters.
"I think it (escrow accounts) takes us a step closer, but converting to an Islamic bank requires central bank approval, which we are still waiting for," he added.
The new Dubai law allows Tamweel and Amlak to take deposits from developers, but not individuals.
Nasser said he was seeking permission to operate as an Islamic bank to take deposits from retail customers and to meet growing demand in the region for Islamic finance products, especially mortgages.
The value of outstanding home loans from banks surged 86% to 42 billion dirhams ($11.44 billion) in the year to March 31, central bank data showed.Source
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