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.
Foreclosures and repossessions of property are coming to crisis-hit, cash-starved Dubai. According to 
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).