GCC Investors show Stability and Strength to the Property Community Across the World

A new survey by global market research company YouGov paints a vibrant picture of the UAE and Dubai real estate property sector. The said survey revealed that 60% of investors expect the real estate market in Dubai to flourish even more in the coming 12 months.

It also found out that over half of home buyers (54%) feel a positive vibe with regards to the continuing growth of the Dubai real estate industry, and another 58%, or three-fifths expects an increase in sales and rental prices over the next year. All these factors indicate a buoyancy in the residential market of real estate in Dubai.

The research was initiated in preparation for an influx of thousands of real estate property investors for the Cityscape Global, one of Middle East’s largest real estate property event.  It will be held at Dubai World Trade Centre from 8 – 10 September, where more than a hundred local developers are expected to participate in the 14th edition of the event where they will showcase their latest projects.

The YouGov survey only shows that location is indeed a significant factor for investors to determine properties they will purchase in the Emirates. According to 861 UAE residents who were part of the survey, the most attractive and in-demand real estate are the ones near public transportation (56%), followed by the ones close to grocery stores (44%), shopping malls (41%), and Mosques (37%).

The survey’s sponsor is Informa, Cityscape Global’s organizers. The study further reveales that studios and one-bedroom apartments are growing in popularity in the UAE real estate market, with investors shifting to more affordable and more ergonomic apartment designs.

Jumeirah Golf Estates is among the developers to first take note of this trend, and will capitalize on this opportunity as they unveil their latest development, AlAndus, which will offer a new definition of affordable luxury.

Yousuf Kazim, Jumeirah Golf Estate’s CEO said: “Jumeirah Golf Estates has had a productive first half of the year and is continuing to reinforce the growth momentum plans for ongoing development. As the progress of construction continues, we are continuing to partner with businesses to ensure our residents are provided with the ideal living community.”

Meanwhile, Sky View Real Estate Brokers and Myra Real Estate Development will also be offering end-users and investors an affordable option with their Botanica Project located in Jumeirah Village Circle.

Sky View Real Estate Brokers’ Director Kash Kanjwani said: “For any mature market there has to be balance between luxury properties and affordable properties.  Previously developers had tried to launch affordable properties, however due to speculators and high demand some of these properties appreciated at such high rate that they reached the same price point as luxury properties.”

“With new regulations in place, the speculation of properties has been controlled and because mortgage LTV has been limited at 50% for off plan projects, most developers are offering easy payment plans and the right pricing.  Demand for affordable housing is now greater than ever and we look forward to showcasing our next project at Cityscape Global.”

This year’s Cityscape Global is supported by the Dubai Land Department and Foundation partners: Emaar Properties, Dubai Properties and Nakheel; Gold sponsors: Arma Properties; Garanti Koza and Al Marjan Island; Silver Sponsor Sobha LLC; District Operator Sponsor: Ejadah Asset Management; Project Marketing Sponsor: Aqua Properties and Property Registration Trustee Partner: Tamleek Property Transfer.

Luxury Hotel in RP Global’s Tower to be Operated by Jumeirah Group

The world-renowned hospitality and hotels company Jumeirah Group has been appointed by leading Dubai real estate property development company RP Global to operate a mixed-use property within its US$1 billion iconic tower. Dubbed the Jumeirah Business Bay, the new property will have 200 hotel rooms, 325 services apartments, and 290 luxury residences.

Intended to be an urban luxury destination, the new property will showcase a dynamic and thrilling sky deck with a bar on it. This will give its visitors a unique view of Downtown Dubai, as well as the buildings found in Business Bay. The tower will house a variety of food and beverage shops, banquet and conference areas, and an award-winning Talise Spa and Health Club. The tower – designed by Atkins Global, the same firm behind the world-famous Burj Al Arab – will have a total floor area of over 3 million square feet once completed.

In relation to the new agreement between the Jumeirah Group and RP Global, Jumeirash Group’s President and Group CEO Mr. Gerald Lawless says: “RP Global is a company committed to excellence, and we look forward to working together and operating this outstanding property. Jumeirah has a reputation for luxury and exceptional hospitality, and our partnership reflects the strong synergies between Jumeirah Group and RP Global. As Dubai moves towards its tourism vision of receiving 20 million visitors a year by 2020, we are proud to be strengthening our Jumeirah portfolio in Dubai.”

“We are investing close to US$1 billion of our own resources into Dubai’s real estate sector to develop a world-class tower that will be operated by the esteemed luxury hospitality brand, Jumeirah Group. RP Global is committed to superior quality and timely delivery and like the Jumeirah Group, we strive to create well designed, innovative lifestyle concepts for our buyers. Dubai’s resident population is growing rapidly and we are looking forward to adding an iconic tower to Dubai’s skyline in partnership with Jumeirah”, says Dr. Ravi Pillai, Chairman of RP Group of Companies, the holding company of RP Global.

The new management agreement was inked between the two companies in a ceremony which took place at the Burj Al Arab, Jumeirah Group’s flagship property. The Jumeirah Group has a number real estate in Dubai and all over the world. It currently has 23 hotels in operation across the Middle East, Europe, and Asia. It also has 25 more in the pipeline that will be established and run under both Jumeirah and Venu brands.

RP Global is the property development and real estate Dubai company of RP Group of companies, a conglomerate founed by Dr. Ravi Pillai. Its operations can be found across 20 cities and 9 countries. The group has a wide range of investments in hospitality, construction & industrial, education & trading, and healthcare & wellness services. Currently, it has conducted projects amounting to US$25 billion globally.

Legal Reference for Real Estate Brokers in Dubai

With the re-emergence of real estate in Dubai, the emirate’s legislation is hard at work in making sure that both the developer’s and the buyer’s rights are being upheld with enforcing and creating regulations, providing the legal framework in governing it.

A huge part of the real estate sector is brokerage, and it’s a stone that wasn’t left unturned. It is worth mentioning that the real estate brokerage business before 2006 was organized by the provisions of the Federal Commercial Transactions Law No. (8) of 1984 under Brokerage Contract Chapter. Such provisions are still the reference in cases not stipulated by private law. After 2006, the executive regulation No. 85 of 2006 on the organization of real estate brokers register in the Emirate of Dubai was issued to govern Law No. 7 of 2006 regarding real estate registration in the Emirate of Dubai, and organise a special register for licensed real estate brokers. The executive regulation has done well in preventing non- licensed brokers from conducting any real estate brokerage process (Article 3 the Executive of Regulation).

In effect, such a vital sector has become subject to the control of government, which increased the level of confidence from investors.

In this article, you’ll be able to read the most important duties and rights of a real estate broker in Dubai, as outlined in the Executive Regulations of the real estate brokers register in Dubai.

Below are the most important duties and obligations of the broker (Articles (14 to 25):

I. General obligations of the broker (Supervisory entity: The department of property and land)

1. Commitment to the ethics of the profession (Article 14)
2. Commitment to the maintenance of a special register of all transactions held by him (Article 15)
3. The broker’s commitment to maintain documents related to sales (Article 15)
4. The broker’s commitment to submit all information and documents requested from him (Article 16)
5. The broker’s commitment, in case of selling on map, to keep a copy thereof (Article 15)
6. The broker’s commitment not to mediate in a transaction in contradiction with law or regulations in force in the Emirate of Dubai deal (Article 18)

II: The broker’s commitments towards the parties of the transaction:

1. The broker’s commitment to deliver a carbon copy of the sale documents to contract parties when so requested by any (Article 15)
2. The broker’s commitment to inform his client of all details of the negotiations, the stages of mediation and any other necessary information (Article 17)
3. The broker’s commitment to inform the other party of all material matters relating to the agreement and which are necessary to deny ignorance, and to inform the two parties of all the circumstances he knows and be responsible before them for any fraud or mistake on his side (Article 17) and Article (19)
4. The broker shall be liable for any loss or damage incurred by any of the parties as a result of his work through fraud, deception, without taking into account the norms to be followed or violation of the requirements of the code of conduct (Article 22)
5. The broker shall not be entitled to claim commission or to be reimbursed the expenses incurred (if he works for the benefit of the other contracting party in violation of its commitments to his representative, or if he accepts from the other party a promise to obtain a benefit, in circumstances in which the rules of good faith and the code of honor prevent accepting such promise) (Article 23) and this article shall be deemed an application a code of honor.
6. If he authorized many brokers to be jointly liable for its work, unless permits them to work individually, (Article 24)
7. If he authorizes many people to work as one broker in a joint action, so as to be jointly liable for the implementation of this authorization, unless otherwise agreed, (Article 25)
8. The broker’s commitment to be honest with regard to any payments, securities or other things given to him by any of the parties to keep or to deliver to one of the parties, and must execute or deliver according to what is agreed upon and the rules of the Secretariat shall apply to the broker with regard to these matters.This article is important as it relates to the provisions, particularly Article 404 of the Penal Code No. 3 of 1987, which reads: ((Anybody who embezzles or squanders funds, bonds or any other movable money, in a way that causes harm to the rightful owner, when it was handed to him as a deposit, lease, mortgage, borrow, use or agency, shall be punished by imprisonment, fine or both.
9. The broker’s commitment not to establish himself as a party to the contract made through it (as he may not be an agent) even if authorized by a contract party, and the penalty resulting from the conclusion of the contract itself shall be depriving him of the commission in spite of being authorized by the party directed him to conclude the brokerage contract (Article 20)This article should be read deliberately and should draw the attention of every real estate broker, as it is among the guarantees granted by the Regulation to the investor, it denies the real estate broker’s right to commission when violating his duties, and prevents the broker to conclude a contract as a party to the contract.As the real estate broker in this case shall not be entitled to any commission, and the clear purpose of the text is a confirmation of restriction being adopted by the legislature in commercial transactions Act, which deprived the broker of taxi brokering whilst being a party to the contract in accordance with the provisions of Article (263) of the Federal Commercial Transactions Law.

Broker Wage

Included in the provisions of articles (26 up to 33), which include the provisions determining the rights and wages of real estate broker set out in the Federal Commercial Transactions Law, the most important of which are:

1. For the broker to be entitled to his commission the contract should be in writing, registered and indicates the conditions and the contract shall be referred to in the real estate register (Article 26)
2. The broker’s wage shall be determined through agreement, otherwise the norms shall be prevailed (Article 27)
3. The broker shall not be entitled to his brokerage fees unless it led to the conclusion of a contract between the two parties, such entitlement shall be based on the conclusion of the contract of sale and registration thereof in the department, unless otherwise provided in the agreement. In case the sale contract is suspended on an agreed upon condition, the real estate broker shall only be entitled to the contract when the condition is achieved (Article 28)
4. In case the brokerage contract is terminated, the broker may claim his fees in accordance with the agreement, unless fraud or fatal mistake is proved (Article 29)
5. If the broker’s instructions or negotiations did not lead to agreement of the parties, he shall not be entitled to any compensation, expenses or costs incurred, unless the Brokerage contract stipulates otherwise (Article 30)
6. If more than one broker is involved in mediation or negotiation for one party, they all share as if one broker and payment shall be divided in accordance with the terms of the contract (Article 31)
7. If a party contracted with many brokers independently on one subject, and one of them succeeded to complete the process, he shall be entitled to full payment apart from others (Article 32)
8. The broker shall be entitled to fees from the party that authorized him, and if both parties were separately liable for the payment of wages owed to him even if those two parties have agreed – with each other – that one party shall bears the full payment, because their agreement is not an argument as it is from a third party (Adapted from article 33)
9. Governed by the provisions of articles (34 up to 41) and confined to two parties:

I. The quartet committee formed by the Chairman of Dubai department of territory

(In case of previous or subsequent amicable agreement to resolve the dispute through the committee) in accordance with the provisions of Articles 34 and onwards of the above mentioned Regulations.

II. Dubai Commercial Court of first instance

If there is no such agreement (the previous or subsequent amicable agreement to resolve the dispute by the committee formed at Property and Land Department in Dubai) the exclusive jurisdiction of the Commercial Court of First Instance at Dubai Courts, that has general authority to address the issue in the light of evidence presented, shall remain.

Conclusion
 
Traversing on the tightrope of the law is by far the most important requirement any player in the real estate sector must fulfil. Reviewing the provisions of the Regulations set by the policy makers aims to achieve a balance that’ll bring about stability in an often-times volatile market. With a sector as big as real estate contributing to the overall economy of the United Arab Emirates, everything in it must be controlled and in order. The real estate brokers is one of the main players in this important industry, they can affect the entire picture. That’s why they need to be as neutral and objective as possible, to submit under the law and be honest in their affairs at all times.

Getting Real with the Real Estate Sector in Dubai for the Q2 of 2015

With the expansion of UAE set to continue for a sixth consecutive year this 2015, it’s safe to assume that the real estate sector will not buck the trend this year.

The real estate sector accounted for 13.3% of GDP last year, the third highest contributor. The Government of Dubai strongly contributed to this expansion, backing major developments including the new Al Maktoum International Airport and the extension of Dubai International Airport.

Apartments

The Dubai property market decelerated during Q2 2015, with average apartment sales prices falling across the city, matching that of Q1 2014. Experts have attributed this to the maturing of the market and correcting values of apartments. Transactions have risen, although not at the rate reflected by forecasts.

For prime apartments, it just keeps getting better. As average sales prices in Business Bay have raised gradually over the past few years, demand has remained constant. The district currently has more than 40 developments currently under way, with the majority expected to be finished and handed over in 2016 and 2017. In Downtown Dubai the view is different. Prices were 19% lower than that of the 2014 peak. However, during the second quarter of this year, demand has been steady and at a healthy level. Sales prices in Dubai Marina and Jumeirah Beach Residence (JBR) are declining but buyers’ interest are picking up. Palm Jumeirah sales prices are 12.5% lower now than at the 2014 peak. There are 20 projects currently are under development on the island with more on the way.

Villas

Villas have been experiencing falling sales prices for nine months now. This has increased buyers’ sentiment for this quarter, with transactions recorded in the villa segment starting to rise again.

Prices for prime villas in high-end developments within the Jumeirah Park, Jumeirah Islands, Emirates Hills and Arabian Ranches communities have kept increasing since late 2014. However, the prices in the first three areas declined in the second quarter, while sales prices at Arabian Ranches’ rose by 5%.

Among these prime communities, Arabian Ranches supply is the highest with more than 4,000 villas. The community is also the fastest growing. By 2018 Emaar, the developer will deliver nearly 2,500 new homes including the Mira Oasis, Lila, Azalea and Samara Rosa, and Rasha Villas sites.

SOURCE: Roots Land Real Estate

Abu Dhabi Real Estate Market Summary for Q2 2015 with 2014 Comparison

In reports reflecting sales growth in real estate for last year, 2014, we’ve seen a double digit growth for Abu Dhabi real estate market. Villa sales prices rose by 16% and apartments up 15%. Rent rates increased by 10%, and 9% for apartments, villas respectively.

It’s been said that investors in Abu Dhabi’s real estate sector can expect sustained rental growth towards 2015.

Abu Dhabi Real Estate Market in Q2 of 2015

This forecast has indeed been positive in both its fulfillment and growth. The second quarter (Q2) of 2015 saw continued stabilization across all asset classes, following the 2013-2014 market recovery. However, the pace of demand growth has slowed due to the decline in oil prices. The decline of the oil sector has lead to a reduction in government spending and sentiment, affecting the real estate market. While short term supply remains under control, the extent to which stable market conditions will continue very much depends on government spending plans.

For the Residential Sales market, while prices have remained stable over Q2 2015, there has been continued downward pressure on transaction volumes, although developers are still generally successful with new product launches. Residential Rents have remained stable this quarter due to limited demand growth, but with vacancies remaining low in high quality, well-located schemes.

Office demand remains subdued due to contraction in some sectors and a slowdown in the oil sector and government infrastructure investment. In spite of this, Grade A office rents have remained stable due to minimal vacancies in quality stock. Further office completions throughout the year are expected to increase the market-wide vacancy rate, but with Grade A rents being upheld.

Retail Rents remained stable this quarter and this is expected to continue in the short-term. A number of Super Regional malls are set to enter the market from 2018, which will partly be supported by new population and tourism growth.

The Hospitality market witnessed solid growth in hotel guests above 2014 levels driven by wide ranging initiatives to grow the tourism sector. ADRs have also registered an increase of 4% in YT May compared to the same period in 2014. Hotel occupancies registered 77% in YT May reaching the same levels as 2014.

SOURCE: Roots Land Real Estate

Dubai Development Legal Requirements That You Need to Know

The Government of Dubai developed clear and simple conditions for licenses. They support conditions to help the real estate in UAE thrive with strict requirements to determine the duties and liabilities of the parties involved in the real estate development together. These actions ensure transparency and bolster confidence in the real estate sector in hopes to attract investors to the city.

Licenses 

In order to proceed with a real estate development, the legal body governing such a business in the Land Department of the Government of Dubai, which is responsible for maintaining a special register for real estate developers, and determines the banks in which the developers and financiers can deposit the installments of the real estate units under the account of the real estate project, should administer licenses. Accordingly, since inception, the real estate developer has to open the escrow account, in which the amounts paid by the purchasers or financiers of the real estate units sold off-plan are deposited.

Article (3) of Real Estate Development Escrow Account Act (8) of 2007 stipulates that the provisions of this law apply to those who sell units off-plan and receive payments from purchasers. Further, Article (4) emphasizes that no developer may engage in such business, advertise in local or foreign media or participate in exhibition for promoting real estate units or properties sold off-plan unless it is registered in and licensed by the Land Department in Dubai represented by its director general.

Article (7) of the Act stipulates in relation to the real estate escrow account that any developer who wishes to sell units off-plan must submit a request to open an Escrow Account and attach the following documents:

(1) A certificate of membership in the Dubai Chamber of Commerce and Industry;

(2) Trade license;

(3) Title deed of the plot to be developed;

(4) A copy of the contract concluded between the master developer and the sub-developer;

(5) The initial architectural designs and engineering drawings approved by the Competent Entities and the master developer;

(6) A financial statement of the estimated cost and revenues of the project approved by a certified chartered auditor;

(7) An undertaking by the sub-developer to start the construction works of the project upon having obtained the approval of the master developer for off-plan sale, or an undertaking by the master developer if there is no sub-developer; and

(8) A standard sale contract between the Developer and the purchaser.

Duties and Responsibilities of Real Estate Developers

Because of this, the lawmakers has not left this issue to the will of developers or investors. Instead, the Government of Dubai has specifically determined the standards relating to the issues that the real estate developer may encounter while executing the real estate project.

The review of the real estate law indicates the cases where the real estate developer is deemed in default in the completion of the project, Article (21) of the Executive Council Resolution No (6) of 2010 approving the Executive Regulations of Law No (13) of 2008 Regulating the Interim Real Estate Register in Dubai expressly states the reasons deemed beyond the reasonable control of the real estate developer, as follows:

(1) If the plot where the project is to be constructed is expropriated.

(2) If a government body has frozen the project for re-planning reasons.

(3) If a building remains or manuscripts are discovered within the site of the project.

(4) If the Master Developer makes alterations to the project site entailing the alteration of the project boundaries and area in a manner affecting the performance of the sub-developer’s obligations.

(5) Any other grounds to be estimated by the Agency. 

Strict Penalties for Violations

Lawmakers have ensured the proper guarantees for both investors and banks. In this regard, Article (16) of the Real Estate Development Escrow Account Act (8) of 2007 stipulates that without prejudice to any penalties stipulated by any other legislation, an imprisonment sentence and a fine of at least one hundred thousand Dirhams (AED 100,000), or either penalty, shall be imposed on those who:

(1) Engage in Real Estate Development activity in the Emirate without a license;

(2) Provide the Competent Entities with incorrect documentation or information in order to obtain a license to practice the Real Estate Development activity;

(3) Knowingly offer for sale Units in fraudulent Real Estate Development projects;

(4) Steal, appropriate, or forfeit any amounts of money delivered to them for the purpose of implementing Real Estate Development projects;

(5)As for auditors, deliberately preparing a fraudulent report upon auditing the financial standing of the Developer or deliberately failing to disclose material facts in their report;

(6) In the case of consultants, knowingly certifying fraudulent reports on a Real Estate Development project; or

(7) In the case of Developers, dealing with a real estate broker who is not registered on the Real Estate Brokers Register maintained by the Department in accordance with Bylaw No. (85) of 2006 concerning the Real Estate Brokers Register in the Emirate of Dubai.

Furthermore, Article (17) stipulates that the real estate developer shall be de-registered and punished with penalties set forth in Article (16) in the cases where:

(1) It is declared bankrupt;

(2) It fails, without an acceptable reason, to commence construction works after the lapse of six (6) months from the date on which he was granted permission to sell Units off-plan (as may be estimated by the Land Department in Dubai);

(3) The license granted to the Developer by the licensing entity is revoked;

(4) It commits any of the violations stipulated in items 2, 3, 4 and 5 of Article (16) of this Act; or

(5) It violates any of the laws and bylaws regulating the activity of Real Estate Development in the Emirate.

Source: Roots Land Real Estate

Abu Dhabi experiences substantial growth in the real estate sector for 2014, 2015 looks more promising

With Villa sales prices rising by 16% and apartments up by 15%, looks like the 2015 real estate market would be a lot better and healthier.

Even rental rates increased by 10%, and 9% for apartments and villas respectively. This means that the demand for prime spaces continues to grow.

As a matter of fact, investors in the real estate sector in Dubai and Abu Dhabi can expect sustained rental growth and relatively stable capital values in 2015, due to the strong performance in 2014 (according to the latest Abu Dhabi real estate report from Middle East’s largest independent full service real estate company, Asteco).

In the Abu Dhabi Property Review: 2014 Highlights & 2015 Outlook, Asteco noted that Abu Dhabi’s real estate market had strengthened over the recent years and this trend is set to continue in 2015, with continued rental growth across all sectors, encouraging investment.

Average sales rates for apartments increased by 15% and villas 16% in 2014, with a strong performance in H1, and stability throughout the year. Additionally, volume of transactions declined in H2 due to the shortage of quality stock for sale in the secondary market, quite a welcome news in the real estate sector. The high sales volumes experienced at the newly launched projects in Ansam, Al Hadeel and Mamsha Al Saadiyat proved that demand for quality projects exists.

“Popular master-planned developments for sale included Saadiyat Island and Al Raha Beach while Reem Island proved to be an attractive area providing more mid-market units. We expect apartment sales prices to remain stable this year as the market becomes more competitive due to the imminent handover of new projects,” said Jerry Oates, General Manager, Asteco Abu Dhabi.

Year-on-Year comparisons starting from 2008 to 2014 highlight the continuous apartment sales price growth since 2012, up on average by 48% for all areas combined. Sales prices in Al Muneera at Al Raha Beach is now rated at AED 1,425 per square foot on average, up 21% compared with last year. Meanwhile, rates at Reef Downtown also climbed 21% to an average of AED 1,000 per square foot. Marina Square also saw a 17% increase to an average of AED 1,375 per square foot.

Villa sales prices witnessed strong growth too, growing 47% on average for Al Raha Beach, Golf Garden and Al Reef Villas during the period.

According to the report, the villa sales market will not be experiencing any drastic movement as there will be limited prime and high-end projects available for sale in the primary and secondary markets in 2015.

Rental rates for apartment were up by 10%, while villas rentals rose by 9%. A prime two-bedroom apartment currently rents for AED 175k-180k per annum with high-end units achieving AED 140-175,000.  Mid to low-end units records an affordable AED 90k-120k.

Villa rental rates are expected to increase during 2015 due to a shortage in quality villa units with occupancy rates expected to remain high.

An average four-bedroom villa could be leased for AED 239,000 per annum in Q4 2014.

The biggest increases in rental rates in 2014 were on Saadiyat Island and Marina Square on Reem Island. The year was also marked by a positive level of transaction activity as tenants continued their flight to quality.

New mid to high-quality developments at still relatively affordable rents are encouraging relocation by tenants to upgraded accommodation, with older properties and lower quality projects being placed under increased rental and occupancy pressure.

The Abu Dhabi rental market in 2015 is expected to see continuous strong levels of demand. A range of new projects are due for handover in 2015 including an anticipated 13,000 apartments and villas which will come online, will have an impact on the Abu Dhabi real estate market by creating greater competition, particularly in apartment rents. - Jeremy Oates

Asteco expects this to continue in 2015 with occupancy rates in popular developments maintaining their current high levels. 

“The Abu Dhabi rental market in 2015 is expected to see continuous strong levels of demand. A range of new projects are due for handover in 2015 including an anticipated 13,000 apartments and villas which will come online, will have an impact on the Abu Dhabi real estate market by creating greater competition, particularly in apartment rents,” said Oates.

Abu Dhabi’s office market was stable in 2014, as landlords of single-owned buildings maintained their asking rates. However, it is anticipated that as new developments such as ADDAX Tower on Reem Island hand over during the year, rates for multiple-owned office space in the Investment Areas could come under pressure as individual landlords compete to secure tenants. 

Since 2013, the Abu Dhabi real estate market has continued to strengthen, a trend Asteco predicts to continue throughout 2015.

Source: Roots Land Real Estate

Mortgage Watch FAQ's By Home Matters

After the worldwide financial crisis, banks seem to have rebounded very well. The recent introduction of non-resident and under construction finance proves that banks are getting more confident in the state of the economy and this has potential borrowers buzzing. Banks have vastly improved their products. They are not as complicated as they once were and their charging structures are now very linear.

WHAT TYPES OF MORTGAGE RATES ARE THERE IN THE UAE?

There are three types of mortgage rates currently available in the UAE: fixed rate, EIBOR rate, and variable rate. The fixed rate is a mortgage that has a fixed interest rate for a term between 1 to a maximum of 5 years. The benefit of a fixed rate mortgage is that the home owner will not have to contend with varying loan payment amounts that fluctuate with interest rate movements. Upon expiry, the fixed rate will revert to either a bank variable rate or to an EIBOR linked rate. EIBOR rates are set by the Central Bank. The Emirates Interbank offered rate (EIBOR) is the average interbank borrowing rate of 11 lending banks and published daily on the central bank website and deemed completely transparent. Lastly, the variable rate is usually predetermined by the bank itself. It takes into account various factors such as internal costs, liquidity, risk, and default rate among other factors.

WHAT IS THE MAXIMUM AMOUNT I CAN BORROW AGAINST A PROPERTY?

Lending prior to 2014 was available at up to 85% for expats and 90% in some cases for UAE Nationals. However due to a change in Central Bank policy, all lending for expats has now been capped at 75% loan to value for property prices under 5 million AED and 65% loan to value for purchases above 5 millon AED. UAE Nationals can secure a further 5% uplift on these loans. All second property and/or investment property is now capped at 60%, with off plan/under construction being capped at 50%.

Affordability is one of the main drivers of whether a mortgage can be sought or not and at what level. We have perhaps all heard of the Debt to Service ratio, but what is it and how does it apply? The debt service ratio (DSR) in the UAE is the affordability calculation set by the central bank. In a nutshell, if you add up all of your monthly liabilities, plus your projected new mortgage repayment, this amount cannot exceed 50% of your monthly income.

IS ‘UNDER CONSTRUCTION’ FINANCE AVAILABLE FOR ALL DEVELOPMENTS?

Only a handful of banks will lend on certain off plan developments and usually only to the bigger developers in Dubai (Nakheel, EMAAR and Dubai Properties), however with the influx of under construction or off plan units and developments available, the banks are currently re-positioning their stance with a view to adding more developments.

CAN A NON-RESIDENT SECURE A MORTGAGE IN THE UAE?

Non-residents can now access finance at up to 75% with rates as low as 4.75%, however the choices are limited. With Expo 2020 looming, we are seeing a sharp increase in enquiries from non-residents who are contemplating an investment in the UAE real estate market.

HOW LONG WILL THE MORTGAGE TAKE TO PUT IN PLACE?

The average time frame for most mortgages is around 4-5 weeks in total. Therefore, do not be fooled by anyone who tells you that a final mortgage approval can be done in 5 working days: it is extremely rare. The mortgage process becomes more arduous when the bank providing you with the mortgage has to clear the mortgage of the seller. This process can add an additional 2 weeks to the overall time frame.

AM I PAYING TOO MUCH FOR MY MORTGAGE?

This could be the case, especially if you purchased within the years 2005-2010. Interest rates were high at that time. It would be advisable to consider a review of your existing facility with a view to refinance to a better rate and/or more flexible product. Some banks offer reduced or zero processing fees for clients looking to change lenders.

CAN I RELEASE SOME EQUITY FROM MY EXISTING PROPERTY?

Most banks will allow you to remortgage your existing unit to release funds. Some banks limit their loan to values and others would only allow an equity release for a specific purpose i.e. to purchase a further property in the UAE. The same affordability model applies as a purchase; however, the costs associated are a lot less as there is no agent or land department transfer fees.

WHY SHOULD I USE A BROKER OR CONSULTANT?

A good mortgage broker would have contact with many different lenders and access to discounted pricing and favourable terms that individual borrowers can’t access.

Home Matters have a large market share, have been established in Dubai real estate since 2006 and is the biggest consultancy in the UAE, both in terms of staffing numbers and volumes of business placed with the banks. This gives us some leverage, and from time to time, can offer our clients better rates and terms compared to applying directly to your bank. In many cases, we also achieve faster turnaround times.

One thing to check when dealing with brokers or consultants is their independence! Are they independent from a bank(s)? Are they independent from a realtor? Committing to a mortgage should be no different. Why should anyone run the risk of trying to tackle the sourcing of a mortgage without seeking the best independent advice?

Source: Roots Land Real Estate