Thursday, August 21, 2008

New mortgage law in Dubai

Mortgage law in DubaiDubai has issued a new mortgage law, so as to regulate the booming property sector of th emirate, announced RERA (Real Estate Regulatory Authority).

As per 35-article decree, issued by Sheikh Mohammed bin Rashid Al-Maktoum, the Vice-President of UAE and Ruler of Dubai, the new law regulates the mortgage process so as to protect the rights of borrowers and lenders, while also enhancing transparency.

The law is effective, after 60 days of its publication in the official gazette. The law states that mortgage contracts can be registered with the land department, on specifying the size of loan, the repayment period, and the value of property to which the loan is linked.

The new law basically covers the mortgage procedures in Dubai. All property purchases happening offplan, for instance, and all the financing must be registered with the land department, said Marwan Ahmed bin Ghalita, the Chief of RERA.

The mortgages on properties in Dubai, should henceforth be sold by registered financial institutions and be insured.

The borrower and lender will have to present complete financial documents during the registration of the mortgage.

The government has granted exemption on properties given to nationals by the government. This gives better confidence to the lender, and more security for banks. Ghalita revealed that land department and banks are currently working out mortgage rates independently from central banks.

Being home to flamboyant developments such as palm-shaped islands, the tax-free Dubai began the Gulf property boom in 2002, by welcoming foreigners to invest in Dubai properties. The nascent mortgage business in Dubai has been growing ever-since, with home loans increasing by 55 percent in the year to March.

According to a statement from Morgan Stanley, the property prices in Dubai, have surged 79 percent since 2007, although a 10 percent decline in prices is expected by 2010.

The announcement of this new mortgage regulation coincides with the crackdown by Dubai government on corruption, with major executives in realty and financial firms facing investigations.

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