Three years after a new mortgage law streamlined the repossession process in Dubai, the anticipated flood of foreclosures is a still a trickle.
Last month, the Dubai Land Department completed the first successful auction of a foreclosed property since the law went into effect, a villa in The Springs that sold for Dh1.22 million (US$332,149). The sale came more than a year after Barclays won a court order to repossess the property.
Some analysts believe the sale might accelerate the number of foreclosures. But that is unlikely, despite the well-publicised woes of the property market.
There is still little motivation for lenders to use the repossession system. And they have been doing everything possible to avoid it.
Lenders hold all the cards in dealing with struggling borrowers - the last thing lenders want is to repossess property that might be worth only a fraction of what the borrower paid for it.
"They don't want to own the property," says Michael Dark, a senior legal consultant with Hadef & Partners, a law firm. "What they want is somebody who will pay them."
UAE lenders have unusual leverage in their attempts to get clients to pay, primarily in the form of the blank cheques many require from borrowers. If the borrowers default, the lenders can cash the cheques - if the cheques bounce, the borrowers could be open to criminal prosecution.
In some cases, borrowers might welcome a foreclosure. They may no longer be able to afford the payments on a project that has been, in some cases, delayed for years. And even if the project is completed, there is no hope of renting the home for anything close to the mortgage payment.
In other countries, the buyers might simply file for bankruptcy protection and give the property back to the lender.
But that option does not exist in the UAE.
"There is nothing you can do as borrower except try to reach agreement with the bank," Mr Dark says. "But you still have personal liability."
Left with no other choice, some borrowers flee the country, fearful that their cheques will bounce and they may be thrown in jail.
"If the client is still there, they [banks] are going to try to come up with another scenario," says Richard Paul, the head of residential valuations in the Middle East for Cluttons.
The intent of Dubai's Mortgage Law number 14, introduced in 2008, was to speed up the foreclosure process on conventional, non-Islamic loans. (In Islamic loans, the lender technically owns the property and leases it back to the borrower, making traditional foreclosure procedures unnecessary.)
Instead of going through civil courts, under the new law lenders could execute a foreclosure through a simple hearing before a judge, after giving the client proper notification. After the judge's order is issued, the property would be auctioned by the Land Department.
But industry executives say there is still little confidence in the lending community that the process will quickly expedite foreclosures. The Barclays property, which was auctioned last month, was put on the block last year but failed to sell after the reserve price was not met, according to sources familiar with the process.
There are as many as 200 properties that have been forwarded to the Land Department for auction, according to industry estimates. But the homes still have not been priced or put on the block. Land Department representatives did not respond to numerous requests for comment.
The Land Department has a vested interest in making sure the market is not flooded with cheap foreclosed properties. These could further drive down prices in a city already struggling with an oversupply of empty apartments and villas.
By keeping high reserves on foreclosed properties, the Land Department can artificially maintain price levels, or at least ensure that foreclosures do not hurt prices.
But delays in the system do not help lenders looking for a quick way to cash in on troubled properties. And it provides one more incentive for lenders to push their cases against borrowers, instead of foreclosing.
"If banks can find a way to deal with borrowers, it's in everyone's interest to delay or suspend the foreclosure process," says Lynette Brown, a partner in the law firm Al Tamimi& Company.
But developing a streamlined, efficient process for foreclosures could have long-term ramifications for the industry. If nothing else, it will give lenders confidence to offer more loans.
"Banks will be more comfortable dealing with new business if they know there is a path to enforcement," Ms Brown says.