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Tuesday, 7 October 2008

Dubai: Tamweel plans $544m Sukuk despite crunch

Dubai-based Islamic mortgage lender Tamweel said on Monday it was planning to launch up to Dh2 billion ($544.5 million) in Islamic bonds in the first quarter of 2009 despite the global liquidity crunch.

"There are ideas to sell sukuk to the local market. They would be in the range of Dh1-2 billion," Tamweel chairman Sheikh Khaled Al-Nahayan told Reuters on the sidelines of a property fair.

"Already there is a desire (for sukuk)," he said, adding that the liquidity squeeze had only affected certain companies in the financial sector.

Tamweel had priced a Dh1.1 billion bond in July. Tamweel and fellow mortgage lender Amlak Finance said on Saturday they were in talks to agree a $2.4 billion merger, but the news failed to lift shares which have been tumbling for weeks on fears that the liquidity crunch has begun to affect Gulf Arab markets.

The merger also comes in the midst of a government crackdown on corruption in the real estate sector, which has already hit market sentiment and the shares of major developers.

Sheikh Khaled declined to comment on the corruption issue but said the current liquidity squeeze would be short-lived.

"There is a liquidity problem but it is in certain institutions in the banking system and not in the whole economy," he said, adding that the central bank had taken good steps to alleviate any problems.

"Liquidity will return to normal within three months and this situation is only temporary." The central bank of the UAE launched a Dh50 billion emergency funds facility to help banks weather the global credit crunch.

Sheikh Khaled said the global crisis had not affected Tamweel because it had diverse sources of finance. "No, because we have taken precautionary steps. Tamweel was expecting it and we were prepared for liquidity squeeze," he said.

The real estate sector should not be badly affected by the credit crunch because demand for freehold properties had not declined, he added.

UAE state news agency WAM said on Sunday that a shortage of at least 28,000 housing units in Abu Dhabi this year was still pushing up rents and stoking inflation.

"Demand on real estate will continue to be there," Sheikh Khaled he said. "Ninety-five percent of people living in the UAE are renting so with rent going up one day it will hit them that it is better to own a house."-Reuter

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