An Islamic finance house is thought to be the UAE’s first bank to waive hefty fees charged to mortgage customers due to delays in the completion of their properties.
Homeowners in the country have been hit hard by conventional banking rules, which state that mortgage holders must continue to pay profit rates to their banks, even if the handover date has passed and their properties have not been finished.
But Dubai Bank has said its Ijarah property finance customers who have been affected by late handovers will have their payment schedules readjusted with new rates, with many clients receiving refunds on the fees they have already been charged.
‘Customers who took out Ijarah Property finance whose profit rates were calculated using a previous method, will see their profit rate retroactively revised to align with the applicable EIBOR plus a margin however, subject to the terms specifically stated in the Ijara property finance agreement,’ the bank said in a statement.
‘Dubai Bank will provide these customers with a rebate, as necessary. For existing clients who have Ijara facilities where the Ijarah rate is based upon the Dubai Bank Base Rate (DBBR), the applicable rate will also be reduced by 1%. This reduction will affect future profit rates and will not be applied retroactively,’ the statement continued.
Dubai Bank has also undertaken to complete all adjustments and refunds by the end of May. Chief executive officer Giel-Jan Van Der Tol said that the move had been approved by the bank’s Sharia board, and was ‘entirely in line with a commitment to share the risk with our customers’.
The move could put pressure on the UAE’s other Islamic lenders, such as Amlak, Tamweel and Dubai Islamic Bank to put similar measures in place. Many projects in Dubai have stalled over the last two years due to oversupply and a collapse in the emirate’s property prices.
However, as few developments have been officially cancelled, many investors and potential homeowners have been forced to continue paying large sums to their banks for delayed projects.
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