Homebuyers hit hard due to absence of credit bureau

Dubai: Delays in securing a mortgage in the UAE, often caused by the lack of a developed credit bureau that is capable of determining the creditworthiness of a potential property buyer, are leaving an increasing number of homebuyers frustrated, according to Chris Dommett, chief executive of leading indep-endent mortgage adviser John Charcol Dubai.

"From my day-to-day experience I can say that mortgage application approvals are considered to be among the top reasons for delays in the [home] buying process, in some cases resulting in potential buyers losing their deposits for not securing fin-ancing before the deadline. Homebuyers are seeking the assistance of professional brokers to help speed up the approval process," he said.

At present Emcredit, the UAE's first private credit information services company, provides credit information and risk assessment services. The company provides its services on a subscription basis to the banks, financial institutions or companies that have signed up with it. Emcredit is still in the process of setting up a comprehensive database, but its services, however, will not include giving credit ratings to individuals.

The delays in approving a mortgage are due to the lengthy process of securing credit data and processing them in order to do a proper due diligence of a potential homebuyer, admits Arif Al Harmi, CEO of Amlak Finance. "Having a developed credit bureau is very important. I think as more and more banks and financial institutions join Emcredit, its services will improve and approvals will be made faster," he said.

To address this issue, Amlak has developed its own automatic credit rating system to facilitate approval of mortgages. "It helps us to keep our promise of approving mortgages in one hour, provided the papers are correct," said Al Harmi.

New law

Incidentally, the Dubai Government on Tuesday issued a Mortgage Law that is aimed at better regulating the market. The law stipulates that mortgage contracts have to be registered with Dubai Land Department, specifying the size of the loan, the repayment period and the value of the property. The law also requires that mortgages taken out on properties in Dubai be sold by registered financial institutions and be insured.

Although Dubai's move will help better regulate its mortgage market, the issue of setting up a developed credit bureau will have to wait for some time till it is taken up by the authorities.

"The best way to avoid losing your deposit is to get ahead of the game and secure financing in advance so that you have peace of mind in knowing that you can actually afford your dream home," said Dommet.