Due to the recent outbreak of COVID-19, the property market in Dubai has witnessed a drastic change. Demand for ready properties saw a decline. Since buyers had other pressing matters to attend to, buying a property was the last thing in their minds. Due to the lockdown imposed by the government, construction work for various projects was also stalled, leading to delay in the completion of various residential developments.
Property developers and sellers, in the bid to liquidate their assets, offered incentives to attract buyers. Property rates for both ready and off-plan properties also reduced.
Now that things are gradually getting back to normal, transactions in the real estate sector have also witnessed a boost. Dubai off-plan property market, which was already witnessing a boom before the COVID-19 hit and crippled the market, is now getting more attention from buyers and investors. One of the major factors that attract buyers and investors to off-plan projects is that they allow buyers to own a property at comparatively lower rates than ready properties.
Despite the popularity of off-plan properties, a lot of people are hesitant in buying them. For some, unexpected delays in the construction of the property are the reason. They do not feel safe putting their hard-earned money or savings for properties that are still in the construction phase. The other reason that prohibited them from investing in an off-plan project is the lack of clarity on the financing aspect. For the latter, we have got you covered. Read this detailed guide on mortgage and financing options for off-plan properties and their details:
Loan to Value Ratio
In Dubai, LVR (Loan to Value Ratio) for ready properties is 75%. This implies that banks can finance 75% of the total amount of the property. For off-plan property, LVR is considerably lower. Banks can finance 50% of the total value. The rest of the amount has to be arranged by the buyer. This rule applies to both locals and ex-pats.
It is important to note that the bank will only grant a mortgage application when the buyer has already paid 50% of the total price of the property.
The Selection of the Bank
In terms of buying a ready property, there are abundant options for buyers to select a bank for financing purposes. However, the choices significantly narrow down for off-plan properties. The reason is that not all banks in Dubai accept mortgage applications for off-plan properties.
Also, bear in mind that there are higher chances of the mortgage if the project is developed by a master developer. Some banks also approve mortgage jobs for projects helmed by private developers. So, it all comes down to the bank you have selected. So, choose wisely!
Eligibility Criteria for an Off-Plan Property Mortgage
Whether you qualify for a mortgage for an off-plan property or not, this greatly depends on the bank you have selected. This is due to the fact that different banks have set different criteria for home loan approvals.
First of all, the bank will check details about the developer. If the developer is included in the approved list of developers, the phase starts. In case it doesn’t, the process ends then and there only with rejection.
The next phase generally involves assessing and verifying details about the applicant. The time it will take for the verification process to complete also varies from bank to bank.
All in all, Dubai off-plan properties definitely have a lot of potentials. This is clearly evident from the fact that in 2017, a higher number of transactions were recorded for off-plan properties as compared to ready properties. This type of property is popular among both buyers and investors. Apart from the price factor, the fact that the latest projects are laced with modern amenities and facilities is another major reason why people prefer off-plan projects. However, arranging for financing is the major hurdle people face when buying such a property. If you are opting for funding from the bank, make sure to select the best mortgage offer after thorough deliberation and consideration.