In Dubai, developers turn mortgage providers

The decline in land costs has helped them better manage the cost of turnarounds

Dubai,United Arab Emirates, January 20, 2019 14:34
Manoj Nair, Associate Editor

Dubai: Banks in the UAE are just not offering enough mortgages to support home ownership – and even when they do the monthly payment requirements can prove quite a burden. The only option is for developers to directly offer home financing, according to Pantheon Developers.

“Banks clearly do not want to disperse 70 per cent of the property’s value, and that’s causing a big tug of war between them and property buyers on the ratio of equity,” said Kalpesh Kinariwala, Chairman. “There are so many hurdles to clear before the funds are released – and it starts at the property valuation itself. Buyers are not getting the benefit of the right valuation because valuation companies are pricing it 10-20 lower to soothe banks and get customers to put up more equity.

“But it’s a fact that many tenants do not have the money to put up more down payment.”

Developers as mortgage providers

With banks reluctant, private developers are then forced to provide mortgage financing themselves. Pantheon is offering schemes where the payments can be made over 10 years for its Jumeirah Village Circle project due to be delivered within the next six months. “We go at a rate lower than what banks offer, on a 30:70 payment plan (30 per cent to be paid by handover).

“We understand that many of our customers have to pay their ongoing rents as well as the monthly installments on the new home. We also give them the installments to pay the initial 30 per cent – 5 per cent every quarter up to delivery and 10 per cent at the time of handover.”

Last week, another Dubai developer, Samana, said it would offer 50 per cent financing for buyers at its soon-to-launch project in Dubai Studio City. Here too, the payment plan stretches to 10 years.

UAE Central Bank push

It is surprising that more developers choose to do the lending on their own, more so at a time when the UAE Central Bank has withdrawn the 20 per cent upper limit on banks’ exposure to the real estate sector. Plus, interest rates had dropped in the recent past, so much so mortgages are in the 3.7-3.9 per cent range.

And yet, prospective homeowners find it’s nowhere near easy to secure funding from banks. It could be the state of the economy that’s forcing banks to remain cautious, especially as job losses across key sectors have piled up.

“It’s unfortunate that at a time when there is so much demand for mortgages, banks are not in a position to lend… or they don’t want to,” said Kinariwala. “Banks are using so many variables to reject claims.

“My question is – if a buyer can put up 30-40 per cent as equity in the property and his income levels can support the EMI (equated monthly installments) requirements, there is no reason why banks can’t give.”

Stretched plans

In the last two years, developers in the city have been going full throttle with post-handover plans, where they require only a small upfront payment. But many of these projects will take at least three years on average to complete – and this phase can prove a cost burden for the buyer.

“Typically, in these schemes, the developer would be taking in up to 50 per cent before they hand over the keys,” said Kinariwala. “In these three years, the buyer has to pay both their rents as well as the installments. If you’re paying Dh3,000 as rent, you might as well pay that for the EMI.

“The benefit of the extended post-handover periods kick in only after delivery. The best option for an end-user buyer from a cost factor is to go in for ready or projects close to delivery.”


When developers fall short of funds, whom do they turn to? These days, it could well be non-banking finance companies (NBFC) rather than banks they approach.

“More and more private developers are tapping this option for short-term funds,” said Kalpesh Kinariwala of Pantheon. “NBFCs are offering structured lending… but quite often at predatory interest rates of 9 per cent and more.

“But there’s still ample demand from developers despite such rates. It’s very much a demand and supply issue. There could be more such lending this year.”


“Fifty per cent financing is a generous move, which reflects our rent-to-own approach for homebuyers, Our partnership with the local financial institutions reflects our mandate to create solutions that meet the changing needs of homebuyers.”

– Alan James Gammon, General Manager of Samana Developers.