Key Requirement Eased by UAE Mortgage Lenders, Bolstering Off-Plan Property Buyers


UAE Mortgage Lenders Revise Project Completion Requirement, Lowering it to 50% from 80%

In a positive development for off-plan property buyers, mortgage lenders in the UAE have relaxed their criteria by accepting projects that are 50% complete or higher. This significant reduction from the previous requirement of 80% completion has streamlined the mortgage approval process for new buyers.

This change is expected to attract a larger pool of local and international purchasers to the UAE property market. Previously, obtaining mortgage approval would often take longer, causing delays for newcomers and resident buyers alike. Recognizing the importance of maintaining accessible funding, banks are adapting to the growing reliance on off-plan launches to meet the increasing demand in the Dubai real estate market.

Despite several interest rate hikes by the US Federal Reserve and the UAE’s banking regulator, the revised project completion requirement remains in place. The current economic climate suggests that the Federal Reserve is unlikely to implement another rate hike in the near future.

Shreen Gupta, CEO and Partner at Grid Properties, working in collaboration with Dubai-based investment firm GII, has observed that certain lenders now offer residents a loan-to-value ratio of 75% once the off-plan project surpasses the 50% completion threshold. This presents promising opportunities for aspiring property buyers in Dubai. Gupta also highlights that non-resident investors can secure a loan-to-value funding of 50% of the property value, emphasizing that mortgage lenders no longer delay payments until the project is nearly finished.

The demand for sub-Dh5 million houses is increasing among new residents and first-time foreign buyers in the UAE. In contrast, all-cash transactions are prevalent in Dh10 million property deals involving foreign investors. However, many buyers would benefit from developer finance assistance or mortgage options to fulfill their obligations.

Asking prices in Dubai have risen by 20-30% since mid-late 2021, necessitating larger down payments from potential buyers. This can create financial challenges once installment plans commence. Therefore, mortgage finance available when a project reaches 50% completion can greatly assist buyers in navigating these circumstances.

Gupta reveals that developers typically aim to collect 50% of the property value during the development and handover phases. While some developers offer 1% monthly installment plans, the upfront payments required for various expenses, such as 4% registration fees with DLD and deposits for utility connections, leave limited flexibility.

Other industry sources have also acknowledged the leniency exhibited by banks in lending standards for off-plan acquisitions. Presently, the ratio of off-plan sales to ready homes in Dubai stands at 50-55%, with potential for further growth.

Lowering the project completion requirement from 80% has been identified as a key strategy to sustain the real estate market boom in Dubai, particularly benefiting homebuyers in the Dh1 million to Dh3 million price range seeking mortgages to cover a significant portion of their obligations.

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