Home loan law will help Dubai buyers breathe easier

DUBAI // The process of applying for a home loan in Dubai will be made easier once the emirate's new mortgage law takes effect, experts say, giving more comfort to property buyers. The law, to take effect in 60 days, was announced earlier this week by the Dubai Government in an effort to regulate the property sector better while protecting the rights of borrowers and lenders.

Under the new law, mortgage contracts must be insured and registered with the Dubai Land Department, and mortgages can only be provided by registered lenders. The new law will also make it easier for banks to repossess homes, should a buyer default on mortgage repayments. The UAE's mortgage market has surged along with the regional property boom. Shuaa Capital, an investment bank based in Dubai, estimates that the mortgage industry reached Dh37.3 billion (US$10.1bn) at the end of the first quarter of this year, a growth of more than 13 per cent from a year earlier, and that it will grow to Dh46.1bn by the end of this year, as more housing units hit the market.

But some investors claim to have lost their deposits on property after failing to secure their mortgage on time. While buyers have about four weeks to source financing for their property, some banks can take at least six months to process a home loan, according to Chris Dommett, the chief executive of mortgage broker John Charcol Dubai. "If you haven't got your finances in place before you buy, then it can turn into a nightmare," he said.

"Banks are under a lot of pressure at the moment. They're relatively understaffed, so just handling the volume of applications is a challenge. A lot of customers find themselves running out of time to complete, meaning the developer can keep their deposit and resell the property. "But this law will simplify the whole process - not so much in terms of getting approvals, but certainly in terms of ensuring the sale and transfer go through successfully."

The new law should provide a degree of comfort to those who have felt the brunt of Dubai's cumbersome and complex mortgage application process. One investor who bought a villa in a prominent project in Dubailand had his confidence shattered when the bank where he applied for a loan lost his application, leading him to lose the deposit on his property. "After I sent the bank all they asked for, I never heard anything from them," said the investor, who asked not to be named. "They did not return my phone calls or emails. Through my agent in Dubai, I later found out that the loan officer who was looking after my application had left the bank. Then, after pursuing the matter further, the bank told me that they had lost my application and had no record of anything."

According to Nick Carnell, a partner at the Dubai office of the law firm Kennedys, the mortgage process is further exacerbated by the time it takes developers to release title deeds on property. He said it could take some developers at least a month to register and release the title deeds. "That system needs to be refined," he said. "You don't need the title deed before applying for finance, but you definitely need it to get the funds released. The new law covers many things, but it might not necessarily speed up the process of ensuring people have funds available to complete the property transaction by the completion date."

Some developers have linked up with banks to ensure their customers get good home loan deals. Earlier this week, Aldar Properties joined forces with Barclays Bank UAE to provide mortgages for investors in its Al Raha Beach project. It was the first deal for Aldar with a foreign bank. "You would hope that this partnership will speed up the mortgage process, but that's not always the case," said Ronald Barrott, the chief executive of Aldar.

"We use about five or six local banks too, and we rely on them all to give a good service. I think the mortgage business is an area that banks should be focusing on and giving a good service. They also need to be a lot more competitive in the packages they offer to people."
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