Mortgage lenders are getting far more generous with their disbursal, signing off on Dh3.8 billion in May and up from April’s Dh2.5 billion on property deals in Dubai. These numbers in turn suggest that end users remain quite active in generating transactions and that prospects of the property market do not hinge on cash-ready investors alone.
The bulk of the mortgage-supported deals involve ready properties or those that are closing in on completion. Details are not available on the average size of the mortgage deals, but the bulk of these would be mid-ticket properties.
Moreover, with a fairly sizeable number of off-plan projects in advanced stages of development, the second-half of the year could be just as busy for home financiers.
“We can surmise the growth rate should increase with the large number of handovers being lined up in the coming months, wherein mortgages can be availed for final payments due to the developer,” said Dhiren Gupta, Managing Director at 4C Mortgage Consultancy. “Mortgage is certainly gaining due to enhanced end-user interest and prominent product offerings.
“Offered rates on residential finance still starts from 2.99 per cent and if we consider commercial finance rates, they are around 5 per cent and upwards.”
Construction milestones
How does this “empanelling” of developers work? Since not every bank finances sales in off-plan projects, they instead have a list of developers with whom they enter agreements for mortgage support once key construction milestones are reached. “Usually to evade potential risks, they are extending mortgage approvals to only those projects that are registered under the master-developers list in Dubai,” said Gupta.
A reality check on those extended post-handover payments
Many a developer has been offering off-plan properties where a major percentage of the paying off can be done after handover. These attractively packaged offers have played a large part in reviving investor interest in off-plan launches.
But Dhiren Gupta of 4C Mortgage Consultancy suggests property buyers should still do some number crunching.
“In an off-plan purchase, mortgage comes into place only once initial 50 per cent is covered by the buyer and secondly when the developer achieves defined construction milestones,” Gupta said. “With the developer’s self-financed payment option, the buyer’s need for mortgage gets deferred even after the handover.
“To some extent, post-conferral payment plans entice investors as they give options to pay over a (longer) period. However, if we take a close look, these outlays are quite immense based on the repayment schedule, which may stress the buyer’s financial planning.”
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Source: Gulf News Website, Business