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Dubai: Arif Al Harmi became Amlak Finance's chief executive in May 2007. Prior to joining the Islamic home finance provider, he was head of commercial banking at HSBC Amanah.
At HSBC Middle East, he was active in developing corporate Islamic banking. Al Harmi also worked at Dubai Islamic Bank, ABN Amro Bank and National Bank of Fujairah in the UAE. He is 35 years old and holds a master's degree in international business from the University of Wollongong.
Set up in 2000, Amlak Finance became a public company in 2004. It is now focused on expanding its mortgage finance business in several new countries in the region. Al Harmi talks about Amlak's expansion and the local housing market in an exclusive interview to Gulf News.
Gulf News: What is your share in the UAE market?
ARif al harmi: It is difficult to get figures on the market size. We have demonstrated our leadership in many areas in the mortgage industry. Today we have one-hour approval, which has redefined the mortgage industry in the UAE. It is based on an automated credit scoring system, and it is an unmatched service that we have today.
What is your outlook for the housing market in terms of supply and demand of residential units? Last year people were expecting more supply, but it did not happen.
It is not just last year, but the last few years, that people have been expecting increase in supply. In our view demand will remain very strong for the next three to five years. We believe that demand will exceed supply. The economy is strong and the population continues to grow at a very fast rate. The UAE has one of the highest population growth rates in the world. We are very bullish on the real estate market.
In what category do you see the highest demand for housing - luxury, middle-income or low-income?
A lot of projects are targeted at the high-end buyers. There is a shortage of properties for the middle-income individuals. There is a great demand coming from the middle-income group, and I think this will continue and more developers are realising that. We are trying to develop more products in that segment.
Another area is commercial property. There is a shortage of space. Today if you want to take office space, it is very difficult to get. With all these economic clusters coming up and more companies coming to Dubai, the demand for offices will be there for the next few years.
The majority of our portfolio is residential property. We have more than 40 developers that we deal with. The mortgage sector is targeted towards individuals to buy their houses. With rent and property prices going up, people have realised that they have to invest in properties.
The market needs around 50,000 units a year. The supply is going to be lower than that for at least three years. But it is difficult to assess the gap because of construction delays. All the stakeholders realise that delivery of projects should be on time, but there are certain limitations that might affect the supply.
Are you seeing more end-users coming to the market?
In the past we had more speculators. Now you see more investors and end-users. In the beginning, you have more investors and speculators entering the market. When the project is getting ready, you have more end-users buying in. It is because now you have more projects being delivered and customers want to move in to protect themselves against increases in rents.
There are opportunities for investors in the market. The government has taken many steps to support the real estate market. For example, the escrow account law was issued last year, the Real Estate Regulatory Authority was set up. The escrow account attracts new type of investors that would otherwise not invest in real estate.
But these steps have been taken in Dubai; they are not across the UAE.
In 2002, you could say that the property law was issued only in Dubai. A few years down the line, Abu Dhabi issued its own property law, Qatar issued its own law. Dubai has taken the initiative in certain areas, but there is great economic and legal reform in all the countries in the region. We see more regulations in the real estate market, which will create more confidence among investors. Saudi Arabia will have its real estate and mortgage law. We see it happening across the region. That is an encouragement for us to expand in the region.
What reform would you like to see in the UAE mortgage industry?
Today there are 23 mortgage players. We will see more players entering the market. There will be more competition. Despite having so many players, there is a lot that can be done. Today mortgage represents just four per cent of the GDP, which is low. That provides huge opportunities. The oldest player in the market is just seven or eight years old.
You had applied for a banking licence. Are you still pursuing it?
The application is still with the Central Bank. It has not been rejected. We have not heard anything officially from the Central Bank. We are moving ahead with our business plans.
One of the key benefits that we can get from having a banking licence is to have access to customer deposits. However, we are talking to many financial institutions and working on our funding plan.
We have been active in the mortgage industry as well as made real estate investments. We have Dh2.6 billion investment in the Meydan project; we have Dh1.5 billion investment in Khawaneej. Real estate is our expertise, and we will continue to invest in this sector. We have a total of over Dh6 billion invested in real estate. We have some projects in the pipeline but there is nothing to announce yet. We are currently busy with what we have.
If the Central Bank comes back with a positive response, we will be happy. If they reject the application, as per the law a reason has to be provided, and we will address that issue and go back with a new application. We are moving ahead with our plans, whether we get the banking licence or not.
What is your plan for expanding outside the UAE?
Last year we completed a strategic review to see where Amlak stood and where we wanted to take it. We came up with a growth plan, which involved building infrastructure for local operations and also to support our regional growth. We have introduced many initiatives. There are new products that we have launched this year. The approval of loans in one hour was one of them. There are certain key areas that we have identified for improving our services.
We have identified some key markets that we want to enter. Last year, we launched our Egyptian operations in October. It is a fully owned subsidiary of Amlak UAE. It was also the first Islamic finance company in Egypt. We have also started operations in Saudi Arabia with strategic partners. Dallah Al Barka, Aseer Group and Saudi Investment Bank are among our partners.
When we want to go into a market, we assess whether we want to go there on our own or with partners. Last year we tied up with the International Finance Corporation of the World Bank to work with them in developing the home finance market regionally. They have the financial expertise and we have the regional expertise in setting up and running the mortgage business. Currently, we are in discussions with them to sell a stake in Egypt. They will also be partnering with us in other markets. We have a successful business model and we will be exporting it to other countries.
How much stake are you willing to give to the IFC in Egypt?
It could be between 10 and 20 per cent. That range is yet to be decided. They will add value by bringing in international expertise.
Which new markets are you looking for?
In Jordan, we will be starting our operations this year. The IPO will be launched in two to three months. We have tied up with the Jordanian government's Social Security Investment Unit. We will have 20 per cent share in that. The major partners are Amlak, Social Security, Dubai Holding's investment arm JD Capital, the Arab Banking Corporation, Tameer Group and others. Twenty-five per cent of this will be offered through an IPO.
In Qatar, we have signed an MoU, for a joint venture with Barwa Real Estate Company. It is a 40-60 joint venture. This company will start operations this year. In addition to that, we have officially applied for a licence in Bahrain. We are also eyeing Syria.
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