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Tamweel chasing the defaulters abroad while customers plan to sue back

Tamweel In the wake of credit crunch, Tamweel, the largest real estate finance provider in UAE, is now chasing defaulters abroad.

As reported by the National, an Indian couple has given Dh6.4 million (US$1.7m) worth of cheques to Tamweel to buy a property worth Dh1.3 million in Dubai. However, they got affected by on going financial crisis and fled Dubai to avoid default, prosecution and possible imprisonment.

The couple is now living with a relative in Bangalore and say they have received phone calls from an Indian debt collection agency.

Ludmila Yamalova, a partner at Al Sayyah Advocates and Legal Consultants in Dubai who is acting on behalf of the couple, said she expected to file legal action at the Dubai International Finance Centre Court within the next 10 days, asserting a violation of Dubai, federal and DIFC law. Tamweel is a DIFC-registered company.

Ms Yamalova said the lawsuit would seek to invalidate the couple’s home loan contract and request a full refund of all payments, including a Dh76,000 downpayment with interest. “Most importantly, we will seek punitive damages,” she said, which could be up to three times the amount of the repayments sought.

Tamweel defended pursuing the couple for the cash. “In the event that a customer … decides to leave the country without meeting his or her obligations, Tamweel, within the available legal framework, takes appropriate measures to secure its dues,” it said.

“Their obligations do not end just because they may decide to skip from the country. Apart from internal resources, Tamweel engages external agencies that are skilled to track customers that are absconding.”

But Ms Yamalova said: “The structure of the deal is pervasive and common practice. I think a lot of people are in the same predicament and have left the country on the same basis.”

Demanding security cheques to cover the tenure of a loan is common with Islamic home finance companies.

Tamweel said yesterday it required cheques more than four times the value of the property “in line with market practice” to cover “the profit payable over the construction period, pre-determined instalment obligations for a defined period and … cheques covering the value of the property … at the expiry of the finance”.

In July 2008, Mrs Rayan and Aldrick D’Souza, 31, signed a forward lease to buy a one-bedroom apartment in Dubai’s Discovery Gardens.

Tamweel asked the couple to write 31 undated cheques at the time of the purchase, including a so-called security cheque for Dh2.9m over the value of the forward lease agreement.

The couple wrote cheques for almost Dh3m and further security cheques for a total of Dh6.4m.

Three months later, the financial crisis hit and the couple began to fear for their jobs. They said they approached Tamweel many times over several months to exit the contract, offering to give up their deposit of Dh76,000.

But they say the lender refused to negotiate and they terminated the contract in July last year. The following month, the couple allege Tamweel started to cash cheques that bounced, forcing them to flee the country to avoid possible imprisonment.

The company said in a statement yesterday: “Tamweel is open to working with customers who have established genuine financial constraints. However, Tamweel cannot cancel customers’ contractual financing obligations.”

Tamweel stopped selling new home loans in November 2008, when the global financial crisis cut off its supply of financing. It has since been engaged in a restructuring by the Federal Government.

At the height of the property boom between late 2007 and 2008, Tamweel and Amlak Finance – another Islamic lender undergoing restructuring – wrote about 60 per cent of all mortgages in Dubai.

Sharp falls in property prices and widespread job losses could lead to a rush of defaults on mortgages this year. Some homeowners have preferred to default on their loans rather than continue making payments after the value of their properties fell below what they paid for them.

As noticed earlier, Mashreq Bank customers have also planned to approach the Central Bank to complaint about exorbitant interest rates.

dubai expat life

Foreclosures and Repossessions coming to Dubai

Foreclosure in DubaiForeclosures and repossessions of property are coming to crisis-hit, cash-starved Dubai. According to Arabian Business the Palm Jumeirah has witnessed its first property repossession, resulting in a bank selling an apartment for just AED745 per square foot – nearly 35 percent below the current market rate.

A three bedroom apartment in Al Shala, on the prestigious development, was “taken back” by the owner’s bank last week after he failed to resolve Dhs1.7 million of outstanding debt.

The property was advertised by Networth Real Estate on the website of UAE daily Gulf News, at an asking price of AED1.7 million for a 2,280 square foot three bedroom apartment. When contacted, the agent said it had “gone immediately for cash”.

It is thought to be the first time any bank has taken back a property on the Palm.

Just last week, according to Bloomberg, Barclays, Britain’s second largest bank, has won the first foreclosure orders in Dubai, clearing the way for lenders holding about $16bn of Dubai home loans to take action when borrowers don’t pay.

Barclays said in an e-mailed reply to questions from newswire Bloomberg that it won the foreclosure orders, without providing details of the cases.

Similar properties on the Palm are currently being advertised close to AED1140 per square foot, nearly 35 percent higher than the bank’s selling price.

Provisions for bad loans in the UAE surged 68 percent by to 32 billion dirhams ($8.7 billion) as of November, compared with a year earlier, according to Bloomberg.

It said that Islamic lender Tamweel, the emirate’s biggest mortgage bank, has several of its own foreclosure claims pending and estimates about 3 percent of its mortgages are in default.

“Banks will be more aggressive in pursuing legal action if they see the process is efficient,” said Antoine Yacoub, a banking analyst at Moody’s Investors Service.

“They 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.”

Tamweel and Amlak to merge into a Realty Bank

Amlak Finance PJSC and Tamweel PJSC, the two leading UAE real estate finance providers, will be merged into a new entity under the umbrella of the Real Estate Bank (a government owned entity).

– The Real Estate Bank (REB) was founded in 1990 to support the building sector and provide appropriate housing for UAE citizens by supporting the Shaikh Zayed Housing Programme. It has more than 7,000 customers.

– Amlak is the UAE’s leading Sharia-compliant finance provider with assets worth Dh14.2 billion in the first half of 2008. Tamweel is a leading property finance provider whose assets in the same period were worth more than Dh10.8 billion.

With smoke of global recession reaching Dubai’s shores, there will be more mergers in days to come.