Banking on trouble

Last night I got a call from a number I didn't recognise. As it was 8pm, I figured it was probably someone I must have met recently. We must have swapped numbers. She must have found me really interesting. And she can't wait to see me again. Whoppee!

"You're Anil Bhoyrul aren't you?" she enquired.

"Yes. No. Maybe. Who are you?"

"I'm Janet."

Janet. Janet. Hmm. Not sure. I think I know her.

"Hi Janet. How are you, it's so good to hear from you," I mumbled, pretending I knew her.

As it turned out, she knew rather a lot about me. I work for ITP. I have an account with Mashreq. I also have a credit card with RAKBANK. I rent a flat in Bur Dubai. I drive a Cherokee Jeep. And recently, I have been looking into buying a house in Dubai.

"As part of the five million dirhams home loan that has been approved for you by National Bank of Dubai, I am pleased to send you a special gift to the value of 200 dirhams. Can I go through the options with you?" she asked.

Hang on a minute. Five million dirhams loan? I don't remember applying for that. I might have sent an email to various banks asking for their home loan deals. And the 200 dirham gift? Does that come off the five million, so now I only owe the bank Dhs4,999,800?

I suspect I am not the only person to have been recently bombarded with home loan deals. Depending on which bank you speak to, mortgages of between 80% and 95% are being touted around. Dubai Bank will even go to 99% financing for Jumeirah Beach Residence Properties.

The offers all sound too good to be true. They are good, and they are true, but as I have been finding out, if you think you can just get a quick mortgage, snap up a new place long before it's built, and sell it for a quick profit (long before it's built), think again.

While the banks are understandably eager for you to grab their cash, most developers in the emirate are equally good at holding you down. The biggest mistake many new buyers are making is the assumption that they can sell their property long before it is ready. True, the value may have risen, but most developers will insist on a considerable amount - if not all - of the initial price being paid up before you can sell. At the very least, maybe a third of the total value.

That 20-year, 99% mortgage deal with Dubai Bank is suddenly not so attractive.

And not surprisingly, from the research I have done in the past week by ringing up the banks, none of them seem to know much about the 'sell on' clauses on properties they are funding.

Then again, why should they? Their job is to give you the cash as quickly as possible, and they do a very good job of that.

Many so-called "experts" have been speculating for months on whether Dubai's property market will slow down, go into reverse or even into a full scale crash. I think the emirate is far too strong economically for any crash or even reverse in prices.

The real problem in the years ahead is hundreds of thousands of buyers being stuck with properties they can't sell, because they can't afford the down payments needed to sell.

Like Janet from National Bank of Dubai later admitted to me, some things just aren't worth the 200 dirhams gift.

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