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
UAE's new expat mortgage law: the facts so far
By Daniel Shane
Wed 09 Jan 2013 10:07 AM

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

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