Badr set to launch Islamic mortgage
Badr al-Islami, the Islamic brand of Mashreq Bank, is close to a new home loan product, called a diminishing musharaka mortgage, that will allow home buyers to accumulate equity in their homes for the first time.
The bank is also predicting that Islamic mortgages will soon outstrip conventional ones in the UAE as they become more attractive. Unlike conventional products, customers buying properties under construction with an Islamic mortgage do not have to begin servicing the mortgage until the building is complete. Taha el Tayeb Ahmed, vice-president and head of product structuring, says: 'It seems that there is far more demand for Islamic mortgages, and the market is becoming very competitive on price.'
The bank hopes to bring diminishing musharaka to the market next year, to coincide with a major marketing push which will start in the UAE, before spreading across the GCC. Ahmed says the marketing budget is 'considerable'.
Currently, most homes in the Middle East are bought using an ijara leasing structure, which ends with ownership being transferred to the customer. The diminishing musharaka involves customers gradually building up ownership of the property, which is held by a special purpose vehicle. Ahmed says: 'Nobody else is doing this in the region yet, and it would allow for customers to pay as much as they want in instalments. In ijara mortgages they are all fixed payments.'
Ahmed also raised the prospect of securitising its mortgage portfolio once it reached a large enough size. 'The minimum size of a securitisation would be about $200 million-250 million because of the cost of issuing it and the time to organise it.'
www.meed.com/bankingfinance
Badr al-Islami, the Islamic brand of Mashreq Bank, is close to a new home loan product, called a diminishing musharaka mortgage, that will allow home buyers to accumulate equity in their homes for the first time.
The bank is also predicting that Islamic mortgages will soon outstrip conventional ones in the UAE as they become more attractive. Unlike conventional products, customers buying properties under construction with an Islamic mortgage do not have to begin servicing the mortgage until the building is complete. Taha el Tayeb Ahmed, vice-president and head of product structuring, says: 'It seems that there is far more demand for Islamic mortgages, and the market is becoming very competitive on price.' The bank hopes to bring diminishing musharaka to the market next year, to coincide with a major marketing push which will start in the UAE, before spreading across the GCC. Ahmed says the marketing budget is 'considerable'. Currently, most homes in the Middle East are bought using an ijara leasing structure, which ends with ownership being transferred to the customer. The diminishing musharaka involves customers gradually building up ownership of the property, which is held by a special purpose vehicle. Ahmed says: 'Nobody else is doing this in the region yet, and it would allow for customers to pay as much as they want in instalments. In ijara mortgages they are all fixed payments.' Ahmed also raised the prospect of securitising its mortgage portfolio once it reached a large enough size. 'The minimum size of a securitisation would be about $200 million-250 million because of the cost of issuing it and the time to organise it.' www.meed.com/bankingfinanceThis content is only available to full MEED package subscribers (MEED magazine and MEED.com).
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