UAE Mortgage Lenders Reduce Off-Plan Project Completion Requirement to 50% from 80%

After lenders gradually loosened the standards on project construction levels, new off-plan property buyers in the UAE are beginning to receive mortgages more quickly than in the past. Banks are now willing to lend when a project is 50% complete or higher. As opposed to the past when they would only do so after it had reached the 80% mark.

By doing this, UAE property market as a whole will have better chances of attracting new local and international purchasers. Many newcomers to UAE, even among resident buyers, would have needed more time to obtain mortgage approval in the past. Banks are aware of the need to keep funding available. According to industry sources, particularly as the Dubai real estate market increasingly depends on off-plan launches to meet demand.

Even after 10 rounds of interest rate increases by the US Federal Reserve and the UAE’s banking regulator, the requirement still exists. (The Fed is unlikely to add another rate hike this week.)

Shreen Gupta, CEO and Partner at Grid Properties, in collaboration with Dubai-based investment firm GII, is actively pursuing a substantial property development portfolio in Dubai. According to Gupta, certain lenders are now willing to provide residents with a loan-to-value ratio of 75% once the off-plan project surpasses the 50 percent threshold. This development presents favorable opportunities for aspiring property buyers in Dubai. (Grid also has two projects in London, including one which is finished and features a partnership with the clothing company Elie Saab.)

“The LTV funding for a non-resident investor is 50% of the property value. What matters is that mortgage lenders are not delaying their payments until the project is almost finished.

An increasing number of new residents and first-time foreign buyers in the UAE are more interested in sub-Dh5 million houses. While the Dh10 million property deals featuring foreign investors are often done in all-cash mode. Who would also favor some developer finance assistance or have mortgages to settle?

Additionally, asking prices in Dubai are up 20–30% from mid–late 2021 levels. Thus, potential buyers will be required to put down a larger amount of their own money. Which can put them in a difficult situation once the installment plans begin. Therefore, any mortgage finance that arrives by the time a project reaches 50% completion will be quite helpful.

The majority of developers strive to receive 50% of the value of the property during the development and handover phases, according to Gupta. Some developers provide 1% monthly installment plans. However, with all the other upfront payments still needed, there is not much that can be done through them.

The 4% registration fees with DLD, the deposits needed to obtain utility connections, etc. are among those additional expenses. That would amount to about 30% of the property value being taken in and taken out altogether.

Mortgage Lenders Now Have More Freedom

The “more tolerant” lending standards that banks use for off-the-plan acquisitions have also been mentioned by other sources in the real estate market. Dubai off-plan sales ratio to ready homes is presently 50-55%, with potential for further growth.

Reducing the project completion restriction from 80% is cited as one of the top strategies by an estate agent to sustain the real estate market boom in Dubai. This would benefit homebuyers who spent between Dh1 million and Dh3 million on their residences and are looking for mortgages to cover a large portion of their obligations.