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The new kid on Abu Dhabi’s block
While the aptly named, Frankensteinian mega-lender Abu Dhabi Finance may boost the UAE’s property market, it further blurs the line between the state and corporations.
November 26, 2008 1:45 by kippreport
There’s a new, fat, rich kid in the capital’s mortgage market: Abu Dhabi Finance (ADF). Abu Dhabi’s mega-lender is a consolidation of five corporations: Abu Dhabi Commercial Bank (ADCB), Mubadala Development Company, Sorouh Real Estate PJSC and the Tourism Development & Investment Company (TDIC); a Frankensteinian creation orchestrated by the Abu Dhabi government. The ADF will have an initial capital of AED500 million.
The establishment of the mortgage lender has been planned for over 12 month, and according to the chairman of ADF, Ali Eid Al Mehairi, the products the lender has created will adhere to the market’s demands: “Our team has been working for months on creating attractive, innovative mortgage products to meet the needs of all types of homeowners. Abu Dhabi Finance will provide liquidity to a market where demand remains high for property,” he said.
The products include up to 85 percent financing over 3-30 years and flexible repayment methods. Although ADF’s operations will focus mostly on projects in Abu Dhabi, it is likely it will also cover projects in Dubai in the future. With banks (like Lloyds TSB) across Dubai refusing to provide home financing to buyers, the launch of ADF may help boost the nation’s ailing property market.
But Abu Dhabi’s creation raises some questions: will the business and finance communities in the UAE ever be independent from the state? And does the success of corporations in the UAE depend on their relationship with the government? The creation of entities like ADF not only blurs the line between the state and corporations in a nation where those line are already hazy, but it also promotes state-owned monopolies.
However, as the credit crunch continues to disrupt economies throughout the region, and governments are forced to consider providing bail-outs and coordinating mergers, large, state-own corporations are likely to increase. –DB