UAE's new expat mortgage law: the facts so far

Opinion is split on what the 50 percent home loan cap will mean for the property market

A decision by the UAE Central Bank to cap mortgage lending to expatriates at 50 percent of home value has split opinion among experts over what impact it will have on the property market.

Some say the policy, announced by the central bank in a circular on December 30, could help curb property prices rises and deter speculators, while others forecast that the move will have little impact on the cost of real estate.

Click here to seen ten facts about the new UAE expat mortgage law

“Most of the investors who are driving up prices are cash buyers. Investors don’t use mortgages, those are taken by the genuine users,” Kabir Mulchandani, CEO of Dubai-based real estate investment firm Skai Holdings, told Arabian Business.

Mulchandani thinks that the decision could lead to a sharp uptick in rental prices, particularly in Dubai's property market. “If this regulation continues, rents will go up because end users cannot come up with 50 percent. It will lead to more investors owning property than end users,” he said.

Craig Plumb, head of research at consultancy Jones Lang LaSalle’s MENA operations, believes the central bank policy will dampen sale price increases, but will make little impact on rents. “[Sales price growth] this year would have been less than 2012 but as a result of this new policy that’s going to certainly reinforce our view that the growth will be less," Plumb said.

“I don’t think we are expecting it to impact on the rental price. What is likely to happen is that developers who aren’t able to sell the properties will rent them out themselves so the pool of properties will be about the same,” he added.

Lenders in the UAE are already said to have petitioned the central bank asking for a delay in implementing the cap. “It was agreed that the Emirates Banks Association will write to the central bank requesting a 30-day delay for implementation of the circular,” one source with knowledge of the matter told Reuters.

Click here to seen ten facts about the new UAE expat mortgage law

Join the Discussion

Disclaimer:The view expressed here by our readers are not necessarily shared by Arabian Business, its employees, sponsors or its advertisers.

NOTE: Comments posted on may be printed in the magazine Arabian Business

Please post responsibly. Commenter Rules

Posted by: Joe Peci

Basically dubai banks are telling the 99% to take a hike. They want their properties to be held by the 1%, the rich and the wealthy from all around the world, who has no need for any of their mortgage products.
If you are part of the 99%, just pay your dues to the 1%, maybe one day your kids will have a place to call home. But for now, make sure that the rich get richer.
What's the impact of the new law? higher demand for rentals, which will result in a higher monthly leases. Property prices will go down initially but will go back up, balanced by the ROI from rentals. Bottom line, the 99% get to sit on the sideline.

Posted by: Sole

This step is perfect move to increase banks incomes especially what they call Islamic finance , these banks will buy properties for cash and then rent it on rent to own basis but with very low rent amount on condition that they will finance 50% of the property for 10 or 15 year and the remaining 50% will be paid by the rent . they will defiantly invent 1000 way to play around the new mortgage law and legalize it , in the end bankers are devils who have been kicked out from hell for their bad behaviors and defiantly they will find ways to solve this issue.

Posted by: Aliyu

LMAO @ your statement 'bankers are devils who have been kicked out from hell for their bad behaviours'.

I hope this is not true. Otherwise, we all are in trouble.

Posted by: CFA

Every stage of recovery has its designed strategies that can smoother the negative effects of any cycle, CB's move is premature lacks conviction... in long run we are all dead, so I am concerned about short term and I beleive its not good for the market as well as the economy.

Posted by: Pierre nayagam

High end ; I haven't seen a price drop psf, instead a lot more properties have appeared on the market , obviously by those who can earn 5% plus. Somewhere else which is where this market cap will retain for a while ..glad to hear ; no more flipping / glad to see good properties worth it's value, safe for the mid term , laughing for the long . In the meantime ; lets watch people stew !!

Posted by: kingkaiser

Pierre, dont you think 2 weeks is a bit soon to get excited about not seeing an impact? Real estate tends to be an asset class that is slow to react.

Posted by: Jason Dixon

If the CB refuses to compromise and holds at 50% ltv, it puts existing banking customers in a far weaker position to re negotiate their interest rates. I've no doubt banks have already recognised that the majority of their customers would be unable to move to another lender as they are unable to raise the 50% deposit. As a consequence there is no motivation for banks to reduce interest rates /increase competitivness as they have virtually zero risk of customers moving to the competition. Am I being cynical?? I don't think so!

All comments are subject to approval before appearing

Further reading

Features & Analysis
Forgotten fees: the challenge of investing in Dubai property

Forgotten fees: the challenge of investing in Dubai property

Investors attracted to low service charges at some Dubai residential...

Dubai real estate: which way will it go?

Dubai real estate: which way will it go?

In this special report, Arabian Business analyses the state of...

Diving for answers: What's happened to Dubai Pearl?

Diving for answers: What's happened to Dubai Pearl?

The mysterious inability of a $6bn mega-project on prime land...

Most Discussed