Dubai Real Estate News
UAE Property Market Trends and Reviews

The construction boom in UAE has resulted in major surge in its mortgage market, with investors being able to take advantage of various new incentives on the offer to purchase real estate.

According to a new survey, the mortgage market in UAE is currently worth Dh.20bn, and is likely to triple to Dh.64bn during the next three years.

Mortgage advisors are of the opinion that Investors are increasingly relying on mortgages to purchase property, with more than 71 percent of UAE investors requiring mortgage to finance their property purchase. This indicates that there exists considerable demand within local market, which shows no sign of slowing down.

This huge demand could be triggered by various factors, such as, increasingly maturing local mortgage market, with both seasoned and first-time investors taking advantage of attractive mortgage incentives to purchase real estate.

Increasing prices of properties are influencing the investments of property buyers, and low interest rates are continuing to fuel the demand. These offers, together with the introduction of new laws, pertaining to property ownership has enabled the UAE mortgage market to truly thrive.

Earlier, the investors had to either utilize their own funds or release equity on other properties in their home country, due to limited availability of local finance. However, the landscape of UAE mortgage market has seen a tremendous change with several new lenders, including the financial institutions and banks, entering the market to take advantage of the rising demand and work with a wide range of developers.

The survey report states that the UAE mortgage market is getting more complex, with mortgage approvals being one of the major reasons behind delays in purchase of projects by investors. Hence, despite several mortgage options being available to property buyers, obtaining mortgage can still be a major responsibility. A good mortgage broker, apart from identifying the best deal, will also have to facilitate the entire process. The property buyers watch for reputation of the lender, the pace at which the mortgage can be processed and other factors, apart from rate alone. The survey states that speed is everything in UAE property market.

The Survey was carried out last year by John Charcoal Dubai, an independent mortgage franchise operation. The Company works in close co-operation with leading financial institutions, real estate agents, and property developers to bring in speed and transparency to property buying process in the UAE.

Mawarid Finance, a Dubai-based public joint stock company, specializing in Islamic Finance, have entered into a partnership agreement with ETA Star, for providing finance to purchasers of units in 'The Centrium' at International Media Production Zone (IMPZ) in Dubai. Potential buyers can get up to 95% finance, and will have to pay installments after moving into their apartments.

The 'Centrium' in Dubai, comprises of four towers, interlinked to each other by bridges and with common facilities in a spacious garden setting. The apartments are available in configurations of single, double and triple bedroom apartments with latest hi-tech amenities.

The Chief Executive of Mawarid Finance, Mohammed Al Neaimi, said that the financing of the 'Centrium' units is based on Ijara principle, with an undertaking to transfer title on fulfillment of buyer's contractual commitments.

The Dubai World Trade Center (DWTC) and the National Bank of Dubai (NBD) has entered into a Dh.800 million short-term loan facility to fund the development plans of DWTC.

This deal will help in financing major real estate projects of DWTC, namely the Dubai Exhibition City and the Dubai Trade Center District, which are being constructed parallely.

The Dubai Trade Center District, located at the heart of Dubai, is a mixed-use development, intended to bring about a new business zone. The Phase one of the project, which is still under construction, will cover 2.3million square feet of grade one office space, along with executive serviced apartments, and various three, four and five star hotels, and a range of retails and dining options.

Another mega project of DWTC, the Dubai Exhibition City will be the first ever integrated event city, which will stand up to the exact requirements of exhibitors, visitors, organizers and delegates from across the globe.

Located adjacent to the Jebel Ali Airport, and spread across a seven square kilometer site, it is in line with the Dubai Strategy 2015 and ensures that Dubai is the world's leading conference and exhibition destination.

The NBD's Statement revealed that the NBD Offset Home Loans, a mortgage loan associated with high interest yielding current account, represents a milestone achievement in product innovation, and sets new standards in customer benefits apart from the leading features of the successful NBD Home Loans product.

The mortgage balance will be offset by the credit balance in the current account, which is one of the major features of the loans, saving the customer interest and facilitating faster loan repayment without being subjected to early repayment charges.

The Dubai World Central (DWC), the major urban aviation community under construction in Jebel Ali, covering an area of 140 square kilometers, has entered into an MOU with Amlak Finance PJSC, the largest real estate financier offering Sharia'a solutions in UAE, to finalize the financing agreement of DWC customers. The agreement will cover the cost of real estate sales of all three major components, namely the DWC Commercial City, DWC Golf City and DWC Residential City.

The CEO-Real Estate of Dubai World Central, Khalid bin Harib, says "Being a project that accounts for development concerns over the next fifty years, we plan to put together a prospective plan which ensures the customers about a finance option being provided, even before the commencement of sales during 2009. The MOU will cover all possible financing options within Amlak’s Islamic financing range, and the first of such agreements to ever happen in the next decade. "

"With a diverse portfolio of villas, plots and apartments on sale, the MOU will look at the best possible alternatives for future investors taking into consideration the huge real estate boom in the region."

DWC, with an infrastructure cost of $33 billion, comprises six real estate clustered zones, namely the Dubai Logistics City (DLC), DWC Commercial City, DWC International Airport (JXB), DWC Aviation City, DWC Residential City and DWC Golf City.

DWC has been endorsed by the Government of Dubai, and is Chaired by H.H. Shekh Ahmed bin Saeed Al Maktoum, the Chairman of Dubai World Central and Dubai Aviation Corporation, Government of Dubai.

With the increase in property and property prices in Dubai, the demand for mortgages is also rising simultaneoulsy. The home loan and finance service providers have a major role to play in the current Dubai realty sector.

Although, obtaining finance was a littly tricky in the past, the market has improved considerably in recent times.

Banks wish to give mortgages, but are not prepared to accept high risks. When a credit history or credit scoring system is absent, banks have had to find their ways to obtain loans for their clients, through evaluation of risk against the property value, while also assessing the individual's monthly income and visa status.

More number of international companies are now making their presence in the local market, and the competition is getting tougher, which is only good for buyers. In the opinion of some investors, when compared to developed markets such as US and UK, where the interest rates on mortgages are very low with four to five percent, the finance options in Dubai are more expensive. The reality is that at about 8-9 percent, the rates are at a moderate level in comparison to less developed countries, where people pay even up to sixteen percent as interest. For instance, in India, an investor is expected to pay atleast 12 percent as interest rate, which points towards Dubai as a better option.

The lenders in a competitive market have no option but to compete on price, and hence cut down the rates, unlike the Central bank, which has a definite role in handling the interest rates.

While considering a purchase over a time period of fifteen to twenty years, even a slight difference in the borrowing rate, could make a huge difference to the buyer. Unlike in other countries that have a credit reference agency, which tracks the credit history of its residents before processing a loan application, the transient nature in Dubai has brought about some troubles with lending and financing. In Dubai, people come and go all the time and the lenders are at a loss to gain information on the credit history of the borrowers. This has increased the risk involved in lending.

However, the establishment of Emcredit, the first independent credit bureau in the UAE, is an exciting news for the market. This encourages more lenders to the market and helps them in making more informed decisions. However, for a system such as Emcredit, to be successful, there should be great collaboration from all lending companies and banks.

The increasing numbers of finance service providers, is changing the realty market in Dubai, easing out the task of owning a home. As the market keeps developing by the day, more banks are coming forward to lend with stiffer competition, and the interest rates are expected to drop down. As for a couple of years from now, there is a need for placing more financing options before the public, so as to make the purchase of a home more reasonable.