{"id":173738,"date":"2010-01-13T07:32:40","date_gmt":"2010-01-13T12:32:40","guid":{"rendered":"http:\/\/www.skyscrapercity.com\/showthread.php?t=1044447"},"modified":"2010-01-13T07:32:40","modified_gmt":"2010-01-13T12:32:40","slug":"dubai%c2%92s-first-foreclosure-may-open-floodgates-in-worst-market","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/173738","title":{"rendered":"Dubai\u0092s First Foreclosure May Open Floodgates in Worst Market"},"content":{"rendered":"
By Zainab Fattah
\nJan. 11 (Bloomberg) — Dubai\u0092s housing rout sent prices down 52 percent in the past year, prompting some homeowners to abandon their cars and mortgage payments and flee the country. Not one received a foreclosure notice.
\nUntil now. <\/p>\n

Barclays Plc won the sheikdom\u0092s first foreclosure cases in court, clearing the way for lenders holding about $16 billion of Dubai home loans to take action when borrowers don\u0092t pay. Islamic lender Tamweel PJSC, the emirate\u0092s biggest mortgage bank, has several of its own foreclosure claims pending and estimates about 3 percent of its mortgages are in default.
\n\u0093Banks will be more aggressive in pursuing legal action if they see the process is efficient,\u0094 said Dubai-based Antoine Yacoub a banking analyst at Moody\u0092s Investors Service Inc. \u0093They were trying to avoid the courts and restructure most of their loans, but once they see a precedent has been set, they will be encouraged to push more cases through.\u0094
\nThe successful foreclosures by London-based Barclays may open the floodgates in Dubai\u0092s property market, which went from the world\u0092s best in 2008 to the worst after credit dried up and speculators who had fueled price increases left the market, according to Deutsche Bank AG. Moody\u0092s estimated in September that 12 percent of the 27,000 residential mortgages in the sheikdom would default within 12 to 18 months.
\nBanks and developers until now have avoided the process of reclaiming homes through the courts, barred by tradition and an arcane legal process that few understood. The Barclays and Tamweel cases may change that, because they show that a 2008 mortgage law — setting out rules for default, foreclosure and repossession — is working.
\nMortgage Law
\nThe law requires lenders to give homeowners 30-day notice of their intent to pursue a foreclosure, said Jody Waugh, a partner at law firm Al Tamimi & Co. in Dubai. Courts then review the case and can issue a debt judgment that turns the property over to Dubai\u0092s Land Department for auction. Waugh estimates the process may take two to four months.
\nBarclays, Britain\u0092s second-largest bank, said in an e- mailed reply to questions that it won the foreclosure orders, without providing details of the cases. The ruling shows that Dubai\u0092s market is \u0093evolving and is poised to come at par with other mature markets of the world,\u0094 the bank said.
\nBoth lenders and developers in the United Arab Emirates have tried to stem rising defaults through out-of-court settlements with distressed customers after falling prices left buyers with mortgages worth more than their properties. That has helped minimize the amount of bad debt on their balance sheets and kept repossessed houses off a market that\u0092s already suffering from too much supply. Provisions for bad loans in the U.A.E. surged 68 percent to 32 billion dirhams ($8.7 billion) as of November, compared with a year earlier.
\nAbandoned Homes
\nBefore the mortgage law was passed, lenders and builders could resort to the courts to enforce contracts, though they didn\u0092t have the right to foreclose.
\nTamweel\u0092s pending cases, filed almost two months ago, involve homes abandoned by owners who left Dubai at the onset of the global financial crisis, Chief Executive Officer Wasim Saifi said. Tamweel\u0092s default rate has been \u0093hovering between 2.5 percent and 4 percent for the past six months,\u0094 he said.
\nAs alternatives to foreclosures, lenders in Dubai have extended payment periods and developers allowed customers with several properties to return some of them. The absence of mortgage securitization makes it easier for U.A.E. lenders to restructure loans than for their counterparts in the U.S., where mortgage debt was often sold on to investors.
\nForeign Banks
\nU.K.-based Standard Chartered Plc and HSBC Holdings Plc top the list of foreign banks providing mortgages in the U.A.E., according to Deepak Tolani, senior research associate at Al Mal Capital PSC.
\n\u0093While it is not Standard Chartered\u0092s preferred approach, foreclosure is a legitimate course of action should a borrower not meet their obligations,\u0094 the bank said in a statement. HSBC declined to comment on the issue when contacted by Bloomberg, while Islamic mortgage lender Amlak Finance PJSC didn\u0092t respond to e-mailed questions.
\nBanks are unlikely to head to the courts to foreclose on properties en masse because of concerns that large numbers of repossessed properties on the market will drive prices lower, said Saud Masud, a Dubai-based real estate analyst at UBS.
\nWhile auctioning a few properties \u0093will be easy,\u0094 hundreds or even thousands of foreclosure sales may draw buyers away from new and secondhand properties, Masud said.
\n\u0091Slippery Slope\u0092
\n\u0093It\u0092s a slippery slope,\u0094 Masud said. \u0093Mass auctions may reprice the property market in a meaningful way as investors prefer to pick real bargains in auctions.\u0094
\nA cultural stigma attached to forcing people out of their homes has also deterred foreclosures. That may not protect speculative investors who helped drive prices up by buying several properties with the aim of selling at a profit soon after.
\n\u0093The mortgage law has given clarity and certainty to the exact process that must be followed by anyone wishing to enforce a mortgage,\u0094 said Waugh, whose firm is currently handling fewer than 10 repossession cases.
\nForeigner Population
\nDubai\u0092s population, which is about 90 percent expatriate, may drop by 8 percent in 2009 and another 2 percent in 2010, UBS AG estimated in March. Dubai\u0092s immigration department doesn\u0092t provide regular statistics on visas.
\nCitizens make up only about 20 percent of the overall U.A.E. population, which largely consists of workers from countries including Pakistan, the U.K. and Lebanon. Workers have one month to leave the country after their work visas are canceled.
\nDubai first allowed foreigners to own property in 2002. That led real estate prices to quadruple in the following six years, helped by a growing expatriate workforce and speculation fueled by borrowing.
\nThe U.A.E. last year scrapped a rule that automatically qualified homeowners in Dubai for a permanent residency visa. Owners of properties valued at 1 million dirhams or more are now required to renew residency visas every six months.
\nAbout 65,000 residential units will be completed in Dubai by 2011 and the emirate needs to create a minimum of 100,000 white-collar jobs to satisfy oncoming supply, Nomura said on Oct 15. Deutshe Bank estimates that 30,000 units may be delivered by the end of 2010.
\nFaster Process
\n\u0093When people talk about litigation in the Middle East, they\u0092re concerned over the possible time it would take to obtain a judgment,\u0094 Waugh said. \u0093The speed at which it appears judgments may be obtained under the mortgage law is a real, positive sign for banks.\u0094 The Barclays cases were filed in November, he said.
\nThe U.A.E.\u0092s central bank in October proposed reducing the time it takes for a loan to be classified as non-performing by half to 90 days. Banks \u0093most probably\u0094 will be asked to comply during the first quarter of this year, said Sofia El Boury, a banking analyst at Shuaa Capital PSC.
\nSo far, no properties have been auctioned, according to Mohammed Sultan Thani, assistant director general at the Dubai Land Department. Requests may start pouring in this year as banks give up on other alternatives, he said.
\n\u0093Amicable solutions are hard to reach when a buyer lost his job,\u0094 or when a property is worth less than the amount owed on it, Thani said.
\nLending Swelled
\nMortgage loans totaled 137.6 billion dirhams in July 2009, central bank data shows. About 25,000 to 30,000 mortgages have been taken in the U.A.E. with more than 95 percent of them in Dubai, analysts say.
\nThe central bank estimates that real estate accounts for about 13 percent of total loans in the U.A.E. Shuaa\u0092s El Boury said the real figure is \u0093much higher\u0094 and official numbers aren\u0092t realistic \u0093given the financing contributions to real estate construction and development in the U.A.E.\u0094
\nThe new mortgage law applies to only some kinds of Islamic lending, Waugh said. Shuaa estimates about 25,000 mortgages were extended by Tamweel and its competitor Amlak alone. The two lenders, which control more than half of the U.A.E\u0092s mortgage market, are set to merge this year. Shares of both companies have been suspended since November, 2008.
\nNegative Equity
\nThe biggest risks to banks come from loans underwritten after 2007, which are \u0093most probably in deep negative equity by now,\u0094 Moody\u0092s Yacoub said. Also at risk are Islamic Istisna\u0092 mortgages where a buyer doesn\u0092t make any payments until the property is delivered, he said.
\nBarclays said the court\u0092s decisions will renew lenders\u0092 faith in Dubai\u0092s legal system, \u0093which could result in bigger lending mandates specifically for mortgage business.\u0094
\nJudging by the first cases, the process seems to be working, Al Tamimi\u0092s Waugh said. \u0093Like anything, there are a few teething problems that are being resolved, but the fact that we have obtained judgments so quickly is positive.\u0094
\nTo contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net<\/a>
\nLast Updated: January 10, 2010 15:00 EST <\/p>\n

http:\/\/www.bloomberg.com\/apps\/news?p…=a4TwfiSIfjdM#<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"

By Zainab Fattah Jan. 11 (Bloomberg) — Dubai\u0092s housing rout sent prices down 52 percent in the past year, prompting some homeowners to abandon their cars and mortgage payments and flee the country. Not one received a foreclosure notice. Until now. Barclays Plc won the sheikdom\u0092s first foreclosure cases in court, clearing the way for […]<\/p>\n","protected":false},"author":2748,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-173738","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/173738","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/2748"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=173738"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/173738\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=173738"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=173738"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=173738"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}