Easier mortgage options driving apartment sales in Dubai

Increasing mortgage availability and low interest rates are boosting sale of completed units in Dubai, according to property developers.

“Buying homes in UAE may just have gotten more easier. Since early this year several top banks have cut interest rates in a bid to attract the real estate mortgage loans and that has had a positive impact on the Dubai real estate market,” Juma Ahmed Majid Al Ghurair, Managing Director of Al Manal Development, told Emirates 24|7.

Niall McLoughlin, Senior Vice President, Damac Properties, says they are pleased to see that the banks in the UAE are supporting the Dubai
property market again.

“The financial markets and real estate markets work hand in hand and it is imperative that the banks continue to provide financing to clients at attractive rates. We have seen offers for as little as 3.99 per cent interest on some financing options. This is pretty much unheard of and very welcome to see. It is a very positive sign that confidence is back.”

Ajay Rajendran, Vice-Chairman, Sobha Group, admits that it is getting easier to get mortgage as banks are competing with each other so interest rates have gone down which is good for the consumers.

Last year, banks were offering up to 75 per cent finance on ready properties, but now a few banks have increased the loan-to-value ratio to up to 85 to 90 per cent. United Arab Bank is offering fixed interest rate of 5.99 per cent for five years, but has a prepayment penalty clause of up to two per cent.

Craig Plumb, Head of Research, Mena, Jones Lang LaSalle, told Emirates 24|7 earlier the higher LTV ratios that the banks are now offering is just one indication of the increased interest in real estate lending in Dubai.

“As the banks have witnessed improved liquidity, they are seeking to increase their exposure to the residential mortgage market to capitalise on the increased demand from home owners in selected locations.”

Property transactions jumped 21 per cent to Dh63 billion in the first half of 2012 compared to the same period last year in Dubai.

However, in 2011, the Dubai Land Department reported transactions worth Dh143 billion, with 60 per cent of the total transactions done through mortgage. It said this indicates the “recovery of the property financing and the return of healthy activities.”

While in April, Cluttons, a real estate consultancy, has said that mortgage lenders, who continue to fight for market share, are offering more attractive rates to credit-worthy clients purchasing particular stock, aided recent increase in property sales.

A NCB Capital report has revealed that the mortgage markets in the six-nation Gulf Cooperation Council remains extremely underdeveloped by global standards.

In the UAE, it was only four per cent in 2005, but is estimated to have surged to around 14 per cent in 2009, while Kuwait and Qatar stood at around 14 and nine per cent, respectively. In Saudi Arabia, it is only around one to three per cent, while in Bahrain it is estimated at 4.5 per cent.

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