New UAE mortgage law: Want a home loan today? Join the queue

Home loan applications in the UAE are set to soar in the next one month, Sam Wani, General Manager, Independent Finance, told Emirates 24|7.

The new mortgage law, announced by the UAE Central Bank on Monday, will be implemented 30 days after it is published in the official gazette, after which banks will be only be allowed to provide a loan of 80 per cent of the property value to Emiratis and 75 per cent to expatriates.

Banks Emirates 24|7 contacted refused to disclose the rise in number of applications, but confirmed that the numbers had increased post the Central Bank postponing the implementation of the mortgage cap earlier this year.

Markets such as Sweden, Hong Kong and Singapore already have mortgage caps in place - a measure to cool the property market and rein in prices.

“Since the market has been booming a lot and we were on verge of a bubble this step will ensure that the price remains under control and affordable for end users.”

Market cooler?

“The fact that mortgage cap will be implemented was widely publicised. The market had factored this in.

Having said that there will be some correction ascribable to the news-value of the announcement. But over time the market should get back to normal and affordable appreciation levels,” Wani says.

Clarity and transparency

Sultan Butti bin Mejren, Director General, Dubai Land Department, says it is an important step in the right direction.

“This is a regulation to the most vital part of the development of the real estate market which is currently witnessing a new wave of growth.

“Setting the highest and the lowest ceiling for lending contributes to protecting the market from falling into the errors of uncontrolled lending as well as encourages lending institutions to operate in the market once again, but with a clearer vision and with mechanisms in place that protect the concerned parties from the risk of default in payments.”

Mejren believes the new regulation will be a contributor to further growth in the market and was a significant step in increasing clarity and transparency.

“It will also enhance confidence in the real estate sector, and will attract new local and foreign financial institutions, therefore increasing their numbers in the market which will create positive competition and give investors more options that will benefit them.”

Non-resident mortgages for overseas investors

Although Ziad El Chaar, Managing Director, Damac Properties, welcomes all efforts by the UAE Central Bank to increase regulation and offer further security in the Dubai property market, he states there is need to provide overseas clients with non-resident mortgages to allow purchase a home in the UAE.

Currently, only one bank of the 51 banks provides finance to non-UAE residents, which is limited to 50 per cent of the value of the property.

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