Dubai: Dubai’s developers are not waiting around for local mortgage providers to make up their minds to offer their funds. With the recent wave of off-plan launches, many developers are offering buyers subsidised repayment plans at zero interest rates.
Or they are scheduling their repayments in such a way that the property owner can use his own funds to pay up to 30 per cent of the initial instalment. And once the property is complete, he can then tap a mortgage lender’s support for the remaining 70 per cent since the unit would now be classified as ready and hence eligible for a loan-to-value of 70:30. (On off-plan, the Central Bank has a lending cap of 50:50.)
This could well prompt banks to pick up the pace of home lending. Or other factors could force their hands.
For off-plan launches, Dubai requires an “Oqood” registration, which secures the rights of the buyer from the Land Department for the property. This, by extension, allows the lending banks to secure the asset against any mortgage support they offer.
Moreover, according to Sameer Lakhani, Managing Director of Global Capital Partners, “There have been far fewer mortgage-related defaults in the current cycle. The liquidity and profitability crunch has come from other sectors suffering defaults.
“Going forward, the post-handover payment plans should stimulate higher mortgage activity as it strips away the developer risk.”
Banks also have the implicit security — the completed property — in such lending. “Asset-based lending will increase as banks move to curtail or reduce trade-finance exposures,” said Lakhani. “Dubai’s banking system is on this path.”
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