Property | General
UAE rules make home ownership unattainable
The UAE's Central Bank has already pumped in $13.6 billion into the banking system to ease the impact of the liquidity crunch. So why can't the banks bail out its customers?
- Iona Stanley, Freelance Writer
- Published: 15:58 December 1, 2008
- Image Credit: Property Weekly/Asghar Khan
- A correction triggered by the global credit crisis is bringing a decline in demand for property in Dubai. The emirate started seeing a boom about five years ago when regional and global investors begun flocking this emerging business hub.
The global credit crisis is forcing governments around the world to bail out their banks. While the US government inked a $700 billion resuscitation strategy, the UK went in for a $87 billion plan to prop up its financial institutions.
The UAE's Central Bank has already pumped in $13.6 billion into the banking system to ease the impact of the liquidity crunch.
In this milieu, the common man wants to know what the banks themselves are doing to bail out their respective customers.
“What are they doing with all that extra money they have received?'' queries RT, a 31-year old Indian national vainly trying to buy a home for his family in Dubai. “Instead of helping us out, they seem to be hoarding it up.''
RT admits that his timing cannot have been more wrong, but he is frustrated at being unable to make much progress in securing a mortgage.
“I work for a well-established business group as manager and earn Dh25,500,'' he adds. “My car loan amounts to Dh1,500 per month and I never have any pending credit card debts — in fact I clear them before the due date every month.
“I have only two members in my family to support, and my wife who works part-time at a health clinic has a salary of Dh9,000. I don't see any reason to be considered a risk category or a financial threat, but if you learn of my recent experiences with banks, you would think otherwise.''
Five months ago, RT was told that he would have to vacate his two-bedroom home near Dubai's Lamcy Plaza because the landlord intended to sell it to a new owner who wished to convert it into a hotel apartment.
At first he was intent on finding his family another apartment to rent — of the same size, and ideally, in the same locality. His search involved contacting three different rental agencies, but with each he came up against a wall.
None of them had any listings that came close to his stipulated budget and the nearest he could get to his original rent was a steep 70 per cent increase. It was at this stage that RT decided to buy instead of renting.
It was also at this stage that he began reading the writing on the wall — he was not going to get much help from his own bank or any others.
RT says he has been trying in vain to get a 90 per cent mortgage on the two-bedroom apartment he has earmarked for his family in Jumeirah Lake Towers, and a second choice he has made at Dubai Marina.
“I know many people who got 90 and even 95 per cent mortgages, and they did not have to run around from pillar to post like me. After my bank offered me a measly 70 per cent mortgage, I contacted several others, only to be told of their ‘new policies' — usually meaning shorter loan terms, smaller loan amounts, higher interest rates or all three. “What are normal people like us — who are not speculators, and don't have affordable places to live in Dubai — supposed to do,'' he asks?
With a deadline of December 31 looming on the horizon, RT says he now has two choices. He is considering borrowing money from a family member to put down against a larger downpayment, and as a second option, looking at opening an account with an Islamic bank which is ready to give him a 90 per cent mortgage.
The latter involves a series of complicated procedures — and a personal favour from his employers — where his salary will be transferred to this new bank instead of his existing one.
The incensed man simply wants to know: “Where has the money in our banks gone, and why are we not being allowed to borrow some?''
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