Dubai: With the mortgage cap firmly in place, off-plan buyers need to be particularly careful with how they schedule their payments.
“Many off-plan buyers pay 25-30 per cent as down payment and the rest at the time of handover,” said Chandrakant Whabi, CEO of Acrohouse Properties. “However, if a bank refuses to classify the property as completed at that time, the buyer will have to pay an additional amount in equity along with the 4 per cent registration fee.
“And properties will not qualify as completed without the handover letter from the developer, which is required to qualify for the 50 per cent loan-to-value from the bank. The property owner thus faces an added risk that a developer might refuse to issue the handover letter without first receiving full down payment.
“This creates a situation where the property owner suddenly has to come up with additional funds of his own and that too immediately.”
These are potential grey areas that could be created in the wake of the enforcement of the mortgage cap for off-plan (up to 50 per cent of the property’s value) and for completed properties (up to 75 per cent).
“The impact of the recent policies to cool the market will impact off-plan properties more than the ready ones,” Whabi added.
“Some market players had concluded that the 50 per cent LTV cap is a signal for banks to lend off-plan, which I think is absolutely incorrect. There were no restrictions on lending to off-plan projects even earlier, but banks still refrained from doing such lending due to their own internal policies. Banks will continue to be cautious towards such lending even in the foreseeable future.”
