Mortgage law will boost confidence amidst turmoil

Dubai: Law No 14, more commonly known as the mortgage law, will increase investor confidence in the Dubai market as it pulls developers, brokers and investors in line, officials say.

Speaking at the monthly Dubai Property Society (DPS) meeting, industry experts said the recent wave of new property laws will further regulate the market as it bids to transform into an end-user friendly emirate.

From now on, mortgages will no longer be valid if not registered at the Dubai Land Department on the new Interim Real Estate Register.

Any sales done prior to the introduction of Law 14 are not immune, as the law applies to completed and off-plan properties, before and after the issuance of the law. Those sales done before the law have 60 days from the announcement of the law to register.

"By the end of October, all existing sales should be registered," Lynette Brown, partner at Al Tamimi and Company, said.

It is thought around 71 per cent of all UAE investors will need a mortgage to fin-ance their properties.

"The issuing of these new property laws is a positive move and will boost both the investors' and the end-users' confidence in the property market amid the current global economical turmoil," Brown told Dubai market professionals and select media.

Brown said that from November, when the laws take effect, "a mortgage will not be valid unless it is registered with the DLD."

Currently in Dubai, Amlak and Tamweel cover 65 per cent of the mortgage market, while 23 other firms cover the remaining 35 per cent, said Tariq Ajaz, senior vice president of corporate communications at Amlak. Ajaz said the UAE was number four in the world, as an active land market, with Dh235 billion registered in sales so far this year.

Ajaz estimated that mortgage financing will increase around 190 per cent in the coming years as the population grows. At the moment, the mortgage market in the UAE is worth about Dh50 billion.

Due process

The mortgage contract must include the size of the loan, repayment period of loan and the value of the property itself.

In order to show the determination to make Dubai more transparent, there are non-negotiable penalties in place.

If the borrower defaults on the mortgage payments, the bank must give 30 days notice to pay. If not, the bank or financial institution can cancel the contract and refund the buyer with a deduction.

If the property is finished, the bank can take over the rights to the property and sell it at public auction.

The cost of registering your property is about two per cent of the property value. To register your mortgage, is 0.25 per cent of the value of the mortgage.

While rental disputes should still go through the DLD, ownership-related disputes should go directly to the Dubai courts, where specific judges will deal with such issues.

The relatively young but prominent property sector in Dubai has learnt a valuable lesson from the older mortgage markets currently suffering from a credit crunch.

"Rather than waiting until issues arise from institutions lending money and failing to have the resources to cover their outstanding debts- like the recent fallout of the world's mortgage giants - the Dubai government has acted in the right time to bring a higher level of regulation and accountability to the marketplace," Adel Lootah, executive director of DPS, said.