Dubai : With retail lending still no more than a trickle, whatever mortgage offers are available seem to be exclusively directed at completed properties or those projects that show clear proof of imminent completion.
Any development that does not meet these guidelines is given short shrift by mortgage providers.
"There has to be a clear line of sight as to when construction would be complete," said Jean-Luc Dubois, managing director of Home Matters, a mortgage consultancy. "It's the stance all the leading mortgage providers active in the market have adopted, and there aren't that many of them."
Thus, the onus is now entirely on the developer to get mortgage tie-ins for their projects. It's also a stark reminder to developers not to indulge in cost-cutting exercises that would tell on the final build quality. This will only risk putting off buyers in a market where there are plenty of options available.
"The quality of what's being built has to speak for itself, and it's the responsibility of the developer to convince the homeowner and the mortgage company this is indeed the case," said Sundar Parthasarathy, executive vice-president and head of consumer assets at Abu Dhabi Commercial Bank.
With more providers in the fray, prospective buyers could hope for some competitive mortgage rates being offered. "The majority of the offers could end up between 5.75 to 6.5 per cent, but there will be other factors that will also dictate this — the client's credentials, the development and other factors," said Parthasarathy. "On the whole, this particular rate band should be palatable to property buyers."
Even now, the loan-to-values available in the marketplace have nudged past the 80 per cent level, again dependent to a great extent on the client's track record and incentives such as having the salary transfer done to the lending bank.
However, Dubois suggested that as far as rates are concerned there's still a sharp variance. "While in some instances they have gone below 5.99 per cent, there are quite a few where rates are between 8 and 10 per cent," he said. "But going forward, there will be more uniformity in lending rates."
For that to happen, there needs to be some rationalising on the retail base rates in the local banking sector. This is the rate at which an individual banks sources funds for its own requirements. ... The prevailing interest rates are quite conducive to buyers who are seriously considering taking mortgage loans.
Trend in housing
These days "rent-to-own" is what mortgage providers want to hear. It's not hard to understand why.
"Mortgage providers are more willing to associate with clients who want to acquire their rental property into an owned one," said Sundar Parthasarathy of Abu Dhabi Commercial Bank. "For the lender, there's a history that can be tracked of the client with the property, and that's a very comfortable situation to be in.
"There are no major numbers of those moving from rental to owned accommodation, but it's a trend that will slowly build up. We are starting to see a steady flow of applications related to such purchases."
Established communities benefit from this trend. Lenders in the region will be more cautious and selective in their financing of real estate projects in six months time, and will better analyse their viability, bankers and executives said. Real estate projects in the region have been affected by the global slowdown with Dubai's once-booming property sector hit particularly hard, with house prices slumping some 60 per cent from their peaks and lending all but drying up.
Developers in the region have been rethinking and redesigning their projects as a result of the economic downturn, scaling down from building high end properties to focus more on the mid-income sector. Graham Hallett, general manager at Abu Dhabi National Property Company and a subsidiary of National Bank of Abu Dhabi, said he saw opportunities to invest in infrastructure, health care, and telecommunications.
(C) Gulf News
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