Amlak FinanceAmlak Finance

Central BankCentral Bank

How do you view the new mortgage law announced by the Dubai Government?
Alharmi: We see that the government's commitment is to regulate the real estate sector and protect the interests of all parties. This is a positive move to secure the interest of all parties involved in the sale and purchase of property within Dubai. The mortgage sector in Dubai is expanding at a rapid rate and this new will help regulate the lending procedures and activities.

Saifi: This is a very positive move for the industry. The UAE's mortgage market is young, but a rapidly developing one. The introduction of the Mortgage Law at this juncture of unprecedented growth will ensure that the industry is better regulated and poised for further sustained growth in the future. The law also plays a major role in boosting greater confidence for both end users and financiers.

Dommett: As independent mortgage brokers we welcome the introduction of the new mortgage law. It should simplify the process of registering both properties and mortgages by providing a single process and provide both investors and banks with increased confidence that their interests are being protected.

How is this going to impact the industry? Do you believe it will further boost the industry and by what percentage?
Alharmi: This law will have a positive impact by raising consumer and lender confidence in the market. The law provides more clarity on the mortgage for certain properties such as under construction and leasehold properties, which will provide more comfort particularly to the lenders and finance companies. As for providing a percentage is concerned, it's too early to comment. Only after this law has been implemented in the next 60 days will we be in a position to comment on how far has the market dynamics changed.

Saifi: It will bring about more clarity and transparency to all transactions relating to purchase of residential and commercial properties. Not only will this enhance protection to the end users, but also create more and expanded opportunities for the industry players who can focus on widening the scope of their offerings to a larger audience.

Dommett: The new law is likely to encourage more banks, both local and foreign, to either enter the mortgage market or to become more aggressive. We have already seen a healthy growth in the mortgage market this year according to figures released by the Central BankCentral Bank, and the new law will continue this trend. It is difficult to accurately predict the rate of growth though, as this will also depend on a number of other factors.

What are the immediate and long-term effects we can expect from this law?
Alharmi: We see a positive sentiment from the market and with regard to long-term this adds to the steps taken by the government.

Saifi: The law will surely bring greater comfort to mortgager providers and encourage them to become more involved in real estate financing. In the long term, this will translate into faster development of the mortgage industry and real estate sector at large.

Dommett: The immediate effects will include the requirement to register all mortgages at the Lands DepartmentLands Department rather than with individual developers. For this to happen, all properties [including those under construction] will need to be registered at the Lands DepartmentLands Department. This will simplify the process, and hopefully speed things up. Longer term, we should see three main effects of the new law: i) Greater confidence among investors and banks in the legal basis of property ownership and the status of mortgages; ii) increased competition [and possibly better pricing] as more players enter the market; iii) a defined process for realising the mortgage in the event of default by the borrower.

With the law coming into effect, what improvisations will we see in term of mortgage products?
Alharmi: As far as AmlakAmlak is concerned, we have always spearheaded the market with innovative products which are a result of our in-depth market research. This is a new law and it's too early to decide on product developments. Our market research team is working on how this new law will impact the market. Once we move ahead with the implementation of the law, we will be able to decide on whether/how we can improvise our products.

Saifi: It's too early to talk about product enhancements. However, we don't feel there will be dilution in credit norms. Credit norms are dependant on several factors, with the legal framework only one of them.

Dommett: We should see a wider range of products and improved pricing as the market matures and competition increases, but it is highly unlikely that we will see 100 per cent mortgages in the near future. The Central BankCentral Bank has indicated that it wants banks to restrict lending to 85 per cent of the property value, and the trend is away from the higher loan to values.

How is the buyer sentiment going to be affected with the mortgage law coming in? Will there be a trend towards a more end-user buyer profile?
Alharmi: The new law will most certainly boost buyer confidence, as regulations are passed to protect the interests first and foremost of the customers and the sector. A solid market ultimately benefits all parties concerned. I believe the trend is towards a more healthy and solid sector and we always welcomed regulations/legislations that boil down to safeguarding the progressive development of the market.

Saifi: On having greater clarity on the legal aspects, their rights and obligations, buyers will have a higher appetite for investing in the real estate industry. Right of ownership (title deed) will be clearly defined too. As buyer sentiments grow more positive, we will witness a more buoyant market for the years to come.

Dommett: We are already seeing more of a trend towards end-user buyers as more developments reach completion. This is reflected in the strong growth in the mortgage market as buyers cannot afford [or choose not to] buy with their own cash. This should strengthen buyer sentiment as greater transparency and a more robust legal framework will help to sustain confidence in the market.

Are there certain issues that need to be incorporated into the new law?
Alharmi: The law was passed based on a comprehensive study of the market dynamics and needs. It addresses a number of issues that have always been a concern in the past. As I said before, the law has just been introduced and we will need to watch the market reaction. Saifi: From a macro view of the law, we believe it is quite comprehensive. We are in the process of studying it in depth for various elements pertaining to different areas of our operations, and will provide our collated feedback to Rera. At the same time, its also important to note that laws evolve over time in line with market dynamics and the changing needs of all participants of the industry. As for mortgage providers, such as us, we have always been operating in the spirit within many articles of this law.

Dommett: The law appears to be fairly comprehensive, although some clarification will be required on one or two of the implications.

By Anjana Kumar

© Emirates Business 24/7 2008

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