90% funding of ready UAE properties is back

The war in the home loan turf is no longer restricted to just interest rates, UAE banks have now upped the ante on their loan-to-value (LTV) ratio.

Last year, banks were not willing to offer between 70 and 75 per cent finance on ready properties, but now one bank increased the limit to up to 90 per cent.

Union National Bank is currently the only bank offering up to 90 per cent finance with interest rates of 4.5 per cent for the first two years.

According to bank’s call centre, the maximum 90 per cent limit is for properties in Dubai and Abu Dhabi, while the limit is set at 85 per cent for other emirates. Besides, interest will not be charged for the last three years of the 25-year loan period for expatriates.

HSBC is continuing to offer finance up to 80 per cent of the property value. Interest rate are as low as 3.99 per cent a year for finance up to 60 per cent or less and 4.49 per cent a year rate applicable for finance above 60 per cent. The minimum salary required is Dh15,000 per month.

Experts are optimistic that higher LTVs coupled with lower interest rates will aid in further recovery of the realty market.

Craig Plumb, Head of Research, MENA, Jones Lang LaSalle, told Emirates 24/7 that 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. Along with the lower interest rates also being offered, this is likely to stimulate additional demand.”

“A lot of people have been looking at buying properties since they perceive prices to go up by year-end. But putting a 25 per cent down payment isn’t possible for many. Since one bank has started offering 90 per cent finance, the banks will certainly join the bandwagon,” said a real estate agent.

In April, Cluttons, a real estate consultancy, said in its first-quarter report that residential properties sales in Dubai have jumped in the first two months of the years on back of better mortgage deals.

"Mortgage lenders, who continue to fight for market share, offering more attractive rates to credit-worthy clients purchasing particular stock, have aided recent increase in sales," the report said.

In January, UAE Central Bank revealed that bank credit to the UAE real estate sector had fallen from around Dh163.1 billion at the end of 2010 to about Dh160.1 billion at the end of September 2011.

Last year, a NCB Capital report said 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 9 per cent, respectively. In Saudi Arabia, it is only around 1 to 3 per cent while it is estimated at nearly 4.5 per cent in Bahrain.

Moody’s Investors Service has indicated earlier that the average mortgage penetration rates for emerging markets were about 15 to 30 per cent, while in developed countries, mortgage lending accounts for over 50 per cent of gross domestic product.


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