90% ready home finance on offer

A local Islamic bank is offering up to 90 per cent home loan to property buyers in the UAE, with the option of even getting finance for registration fee.

“Never before offer! Enjoy up to  90% home finance plus have your registration fees financed,” Ajman Bank sms read.

A call centre employee of the bank confirmed that the scheme was being offered till end of the month with the maximum finance of Dh10 million for ready properties and maximum tenure being 25 years.

The sms also stated that the bank’s profit rates were as low as 3.99 per cent.

This website reported earlier that banks were offering up to 85 per cent of the property value, as the Central Bank’s new mortgage regulations had not come into effect.

Three bankers said that though they were expecting implementation of Central Bank’s new guidelines on home loans from December 1, no information was yet available on when the new rules will come into force.

“We were previously informed that the new rules will come into force from December 1, but till now we are lending at the previous loan-to-value (LTV) ratio,” a senior official of a local bank said on conditions of anonymity.

The UAE Central Bank issued new mortgage lending regulation late October, which allows banks to provide loans of up to 80 per cent of the property value to Emiratis and 75 per cent to expatriates.

If UAE nationals seek loans for a second house/ investment property, the loan eligibility shall not exceed 65 per cent of the value of the property, while expatriates buying second house will be eligible only for a mortgage of up to a maximum of 60 per cent of the property’s value. The maximum LTV for mortgage on property being purchased off-plan is set at 50 per cent, regardless of the purpose, value or category of the purchaser.

The rules, the Central Bank has said, will come into effect one month after being published in the official gazette.

The new rules even bars home buyers from using personal loans or credit cards to meet their down payment requirements.

In November, Abdulaziz Al Ghurair, Chairman of UAE Banks Federation (UBF), the representative body of banks operating in the country, had called for penalties for banks and bank employees found flouting the recently announced mortgage rules.

“UAE Banks Federation will work closely with the Central Bank to make sure that all banks adhere to the recently announced mortgage rules. We will soon recommend a set of penalties for banks and bank employees who violate these rules,” Al Ghurair had said.

The UAE Central Bank's Financial Stability Review in September 2012 put UAE banks' direct residential mortgage exposure at Dh37 billion for nationals and Dh37.6 billion for expatriates as of year-end 2011. The total represents less than 7 per cent of the UAE banks' net loans and advances at the time.

In a report on the impact of the new mortgage regulation, Standard & Poor’s Ratings Services said: “Although we believe this exposure will likely have increased since then — in line with the increased volume of real estate transactions in 2012 and 2013 — we would still expect that residential mortgages constitute less than 10 per cent of the UAE banks' lending books. We consequently expect the direct impact from the regulation on the aggregate lending to be rather limited.”

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