More Dubai residents are taking out home loans

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More Dubai residents are taking out home loans
Photo used for illustrative purpose only

dubai - End-users approach banks for close-to-completion projects priced under Dh1 million


Deepthi Nair

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Published: Tue 22 Nov 2016, 6:21 PM

Last updated: Wed 23 Nov 2016, 8:01 PM

There has been a 119.5 per cent increase in the number of people searching for mortgages on in the third quarter of 2016, compared to the same period in 2015.

dhirenThis shows that end-users in Dubai are increasingly looking to take out mortgages to buy property. Data provided by Dubai Land Department show that unit transaction sales recorded for November are worth Dh850.21 million, of which mortgage transactions accounted for Dh462.81 million.

The percentage of mortgage buyers has steadily increased in the past couple of years. Close to half of all property transactions in Dubai currently are through mortgages.

"In the past, cash transaction were the high majority of all residential property transactions. However, in recent years, this has changed and the ratio is in the favour of mortgages in the region of 60 per cent and cash 40 per cent. Commercial finance is still limited and costly, so this still sees much higher cash transactions," says Warren Philliskirk, director,

Off-plan vs completed projects
Attractive payment structures by developers have resulted in off-plan buyers opting for mortgages for closer-to-completion projects. Most developers now offer a payment plan of 60 to 70 per cent on project completion.

Banks are only allowed to lend 50 per cent of the value of an off-plan project, as per UAE Central Bank guidelines.

"Completed projects get a higher loan to value of 75 per cent than off-plan mortgages for which buyers only get 50 per cent, thus most of our buyers have realised that taking mortgages for close-to-completion properties makes more sense as they get a higher LTV. This reduces their financial burden. A lot of developers understand this and are coming up with payment plans with carol30 per cent down payment and 70 per cent on completion. It is a win-win situation for all parties, better sales for developers and easier to buy for purchasers," says Carol Priya Monis, head of mortgages,

The sales of property from Dh5 million and above is less as the higher deposit of a minimum 35 per cent is restricting demand for mortgages from this segment.

Mortgage consultancies are seeing good demand for both apartments and townhouses that are priced below Dh1 million.

Villas vs apartments
According to Dhiren Gupta, managing director, 4C Mortgage Consultancy: "Apartments outperform in the market and there are a few drivers - bottoming out of sales price, availability across communities and instant exposure to the return. Moreover, it's easier to find a buyer for an apartment at the time of sale."

Middle- and upper middle-income communities such as Jumeirah Lakes Towers, Business Bay, Jumeirah Village Circle, Dubai Sports City and Dubai Silicon Oasis have seen more buyers opting for mortgages.

Meanwhile, analysis of inquiries across the 68 home finance products listed on reveals that variable rate mortgages are more popular among users. Says Ambareen Musa, CEO and founder: "Potential borrowers are increasingly opting for variable rate options, most likely due to the introductory fixed rates being applicable for just the initial one to three years, and banks imposing restrictions on partial settlement of loans during this fixed rate tenure." has seen an uptick in consumer interest for Islamic finance loans. "We expect that interest to increase in 2017 as non-Muslims continue to investigate Islamic banking products," informs Jon Richards, CEO,

warrenBanks are also seeing a lot of mortgage refinancing activity.

"We are seeing a lot of refinance activity from self-employed business owners who are using their property to raise finance for business expansion," says Philliskirk.

"Many of our clients have realised they had mortgages that were several years old and were surprised how much they could save by doing a refinance," informs Monis from

However, refinancing on high-end properties have been constrained as outstanding balances are usually higher than permitted borrowing ratios.

"UAE homeowners with prevailing mortgage exposures are taking advantage of the race among UAE banks as they are more competitive in their product and offer a promotional viable rate and an extended fixed term. Moreover, banks are more flexible to do away with the transfer charges which reduce the transaction cost if doing buyout from one bank to another," adds Gupta. Experts insist it is cheaper to pay monthly mortgage installments than high rents. In a majority of cases, the mortgage installments are lower than the monthly rent payments.

Interest rates offered by UAE banks are still relatively low compared to past peaks in the UAE of eight per cent and above. Therefore, it is a good time to opt for a fixed rate mortgage and lock in a rate for a longer period.


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