Abu Dhabi Finance and the Abu Dhabi property developer Sorouh are getting together and offering mortgages with interest rates starting at 7.24 per cent per year with no application or processing fees, the companies said today. Borrowers can use the mortgages to buy apartments in any of four Sorouh developments: Sky Tower, Sun Tower, Tala Tower and Golf Gardens. The three towers are all on Reem Island, while Golf Gardens is just outside the city, right next to the Abu Dhabi Golf Club and Aldar's Al Raha Beach development.

According to a press release (after the jump), the deal gives borrowers a 1.01 per cent discount on prevailing interest rates for a year, and a 0.5 per cent discount for six months thereafter. Presumably, after that point interest rates would return to prevailing levels, which in the case of mortgages in the UAE are generally fixed to a percentage above the reference EIBOR rate.

The announcement didn't come as much of a surprise. Abu Dhabi Finance, which was set up late last year as a partnership between Mubadala, the Abu Dhabi government investment arm, Abu Dhabi Commercial Bank and three local developers (including Sorouh), said recently that it was in negotiations with developers across the emirate to offer mortgages on properties in their projects.

In making its offer, the company appears to be trying to gain more recognition in the market, although it hasn't been a crowded one since the UAE's two big mortgage lenders, Amlak and Tamweel, last year stopped lending and entered merger discussions. It also helps to bear in mind that only about 10 per cent of property purchases in Abu Dhabi are financed; the vast majority are cash. Given the downturn, though, it would be reasonable to assume more potential buyers will need a mortgage to continue to invest in property. With projects on hold and sources of capital drying up, developers also don't have much to lose by partnering with Abu Dhabi Finance and hoping business gets rolling once again.