New regulation is likely to further integrate the real estate market with capital markets

The Dubai Land Department (DLD) has proposed a Dubai new mortgage law and finance law to bring in more capital to the real estate market.

The main objective of Dubai new mortgage law:

Attract foreign investors and public joint stock companies listed on Nasdaq. The law also aims to encourage alternative financing methods and cater to investors with small and medium-sized portfolios.

A lot of non-residents are looking to buy property in the UAE and they are looking to get a higher proportion of financing as well. Currently, banks are only offering a loan-to-value ratio of 60 to 65 per cent on ready property for non-resident investors. Banks are hesitant to lend to them owing to the higher degree of risk involved. Certain banks are willing to offer 50 per cent LTV for non-residents based on bank statements and passport copies. The documentation is also complicated as they need to fly down to Dubai to do all the paperwork and transfer.

The proposed mortgage law will attempt to make it easier for specialized funds to come into the Dubai real estate market. Bringing in more real estate investment trusts.

The lower to mid-income residents in Dubai are also keen to buy property to get out of the rental trap. However, the initial upfront costs to purchase a home are prohibitive.

It may also instigate more short-term speculative investors versus end-user buyers, that the market needs, more especially in the affordable and lower mid-market segments. Regulations allowing to distinguish between end-users and investors would be welcome to absorb the upcoming supply and work for the short term while having a positive long-term impact as well.

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