Gulf needs mortgage finance agency: DIFC forum

The need for a mortgage finance agency to facilitate and expedite the development of the real estate and property markets has been highlighted on Tuesday during a Dubai International Financial Centre (DIFC) forum.

Speakers and delegates attending the DIFC Economics Workshop on Housing Finance, evaluated the current scenarios, identified the key challenges facing the real estate sector in the region and discussed possible solutions.

It was generally agreed that the activation of home finance flows near to pre-crisis levels was the key to faster recovery and future growth of the real estate sector, the building and related industries and regional economy in general.

However, the need for better risk management in the property development and financing sector and establishment of an improved real estate legal and regulatory framework in the region was also highlighted.

Dr Nasser Al Saidi, Chief Economist of the DIFC Authority, explained the rationale behind holding the workshop.

"DIFC hosted the Economics Workshop on Housing Finance as the real estate sector is a major contributor to the region's economic activity, representing major investments that have been made in the residential, commercial and industrial structures capital stock. It was one of the first to get affected by the still on-going global financial crisis and we need to find ways to re-energise it.

"One of the key ways of doing it is by exploring measures aimed at increasing housing finance and improving access to finance for buyers; on the supply side, banks and mortgage finance firms need to better identify challenges and improve their ability to manage the associated risks."

He added that the exuberant growth of the sector in pre-crisis times outpaced the institutional structure and sources of housing finance. "In particular, we did not have a mature, well developed mortgage market to support the sector. Now we feel that a Mortgage Finance Guarantee Agency should be established to maintain orderly conditions in the real estate markets, supporting and facilitating this key sector and developing standard eligible mortgages. Such an agency would be an effective bedrock for banking and financial housing finance institutions, enabling them to better manage risks. There also needs to be the legal and regulatory infrastructure to support mortgage-backed securities and a secondary market for mortgages," he said.

Syed Farhan Fasihuddin, Housing Specialist of IFC Global Financial Markets, said: "Increasing the availability of affordable housing finance is critical for bringing about stability in housing prices - DIFC's Housing Finance Workshop is an excellent forum to have a practical discussion with stakeholders on how to do this."