The UAE has some of the most sophisticated mortgage laws in the world, characterized by their flexibility and rapid response to changes in the market, which makes them one of the top attractions for real estate investors.
The UAE government has strengthened its efforts over the recent years to provide housing and employment to citizens, taking advantage of the country's advanced banking sector. The UAE already has 23 local banks and 28 foreign lenders. In addition, the government owns large stakes in many local financial institutions.
Meanwhile, the government places a special emphasis on providing affordable housing solutions, especially for local nationals. Promoting home ownership, for the middle income segment in particular, is obviously a national priority for the Emirati authorities. One way to achieve this is through providing affordable properties and flexible mortgage options.
The current interest rate for real estate finance ranges from 3.99% to 4.5%. The loan also comes accompanied by other features, such as issuing pre-paid credit cards and life insurance policies. Some local banks have also lowered the interest rate of real estate finance to 2.94%. Other lenders choose to contract directly with UAE real estate developers in a bid to gain customer confidence. This process facilitates the transfer of house ownership from the developer to the bank’s client who wishes to buy.
On the other hand, a wide range of banks and companies are competing in the UAE mortgage market, including national and foreign entities of all sizes. One notable observation over the last months has been the attractive offers provided to customers, including credit and installment facilities for long periods. In some cases, the bank offers a lower interest rate during the first year, and in sometimes for two years. These promotions help the lenders secure a big chunk of mortgage markets, as they consider financing citizens' properties a safer vehicle in terms of repayment and obtaining reliable collaterals.
The UAE Central Bank has issued a comprehensive mortgage programme, which covers financing ratios and repayment dates for citizens. The regulator has specified an 80% financing rate for a citizen’s first home, provided that its purchase price is no more than AED5 million. This rate goes higher to 85% in case the value of the property is less than AED5 million.
The terms also stipulate the repayment period of the mortgage loan is a maximum of 25 years for citizens, and that the maximum age at which the borrower will pay back the last instalment is 70 years. Further, the maximum amount of financing should be equal to the citizen’s total income over the course of eight years.
