Dubai real estate rebound helps boost Tamweel debt

Five years after Dubai mortgage provider Tamweel stopped lending amid the emirate’s real estate crash, the company’s Islamic bonds are beating peers as the property market rebounds. Tamweel’s sukuk maturing in January 2017 returned 5.5 per cent this year, the most among the 23 securities in the HSBC /Nasdaq Dubai GCC Financial Services Sukuk Index. The benchmark gauge, which includes debt from the United Arab Emirates to Saudi Arabia, has gained 2.1 per cent in the period. A rebound in real-estate prices spurred by the economic recovery in the Gulf business hub has boosted UAE bank lending by 7.2 per cent this year as property prices climbed an annual 40 per cent. Tamweel , which was taken over by Dubai Islamic Bank in 2010, has benefited as its new owner provided a source of financing. ” Tamweel has been a turnaround story and a way to gain exposure to a recovering Dubai real-estate market,” Yaser Abushaban , the executive director for asset management at Dubai -based Emirates Investment Bank , said in an e-mailed response to questions November 28 . Same risk “The support from Dubai Islamic Bank has been a part of the turnaround after a period of distress post the 2008 crisis.” Dubai Islamic Bank , the UAE’s biggest bank complying with Islamic banking rules, announced plans in September 2010 to more than double its stake in Tamweel to 57.33 per cent. The bank this year offered to take over the mortgage provider fully through an open offer and has so far boosted its holding to 86.5 per cent. Dubai Islamic Bank has also financially supported Tamweel since 2010 and last year guaranteed payments on the sukuk that it sold, the first offering since 2008. “People started recognising this is the same risk as Dubai Islamic Bank , therefore it didn’t deserve to trade at a big discount,” Abdul Kadir Hussain , the chief executive officer at Mashreq Capital DIFC, said by phone on November 28 . A maturity of less than five years has also helped demand, as the price of shorter-dated bonds is less sensitive to interest rate changes than longer-dated securities, he said. The price of longer-dated debt dropped following a spike in the yield of Treasuries this year.

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