The mortgage law comes with a focus to lure foreign investors and public joint companies listed on Nasdaq, reported Khaleej Times.
Carol Monis, head of mortgages, MortgageMe, a financial consultancy said: “A lot of non-residents are looking to buy property in the UAE and they are looking to get a higher proportion of financing as well. Currently, banks are only offering a loan-to-value ratio of 60% to 65% on ready property for non-resident investors.
“Banks are hesitant to lend to them owing to the higher degree of risk involved. Certain banks are willing to offer 50% LTV for non-residents based on bank statements and passport copies. The documentation is also complicated as they need to fly down to Dubai to do all the paperwork and transfer.”
The mortgage law will smoothen the process for specialised funds to penetrate into the Dubai real estate market. According to David Godchaux, group chief executive officer of Core Savills, “This new regulation is expected to further integrate the real estate market with capital markets. These Reits and alternate financing avenues will support the expansion of funding channels available to developers, while also allowing higher exposure to foreign investment funds to Dubai’s real estate market and providing investors [individual/retail] liquid, diversified and smaller ticket size investment instruments.”
“This involves a 25% deposit for a ready property, 4 percent transfer fee, 2 percent broker fee, 1 percent bank processing fee, 0.25% mortgage registration fee, Dh4,000 trustee fee, and more. In short, they would have to arrange for at least 32% of the property’s value as initial costs. This should be relaxed,”Monis concluded.
“However, it may also instigate more short-term/speculative investors versus end-user buyers, that the market needs, more especially in the affordable and lower mid-market segments. Regulations allowing to distinguish between end-users and investors would be welcome to absorb the upcoming supply and work for the short term while having a positive long-term impact as well,” added Godchaux.