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Step up and support the market, Damac Properties tells banks
Developer’s managing director says there’s a need for non-resident mortgage.
October 23, 2013 3:26 by kippreport
Damac Properties is calling on all banks to support the resurgence in Dubai’s real estate market and provide a non-resident mortgage to allow international investors the chance to own property in the emirate.
Ziad El Chaar, managing director of the Dubai-based luxury developer, says banks are still “too timid” and must step up and return to lending in order to attract a wider international investor base.
He adds that one of the most important obstacles holding the market back is the lack of mortgages.
“What we need is a practical and pragmatic non-resident mortgage,” he says. “Dubai will then be able to attract more people who are genuinely interested in owning a property in the city – but they can only do that through a proper mortgage.”
El Chaar says most of the business today is still conducted on equity and not leverage, adding that cash buyers made up approximately 75 per cent of the number of transactions in the emirate in the first six months of the year.
If a fully regulated system is implemented, one which has the “appropriate checks and balances”, Dubai will witness a strong surge in long-term, sustainable investment. Until such a system is in place, however, El Chaar believes mortgages will never be a big element of the local real estate market.
“Not everybody can come straight into the market with US$1 million and buy a property with cash, in full,” he adds. “To be able to get a mortgage today, you need to be a resident of the UAE and be able to demonstrate that a portion of your income is coming from the country. So, if you are living overseas and would like to buy a second property in Dubai, you just can’t.”
In a recent interview with Kippreport, El Chaar dismissed concerns that the property market may be heading towards another crash or bubble, emphasising that the demand for owning a property in Dubai has always been high and current regulations ensure that developers are much more committed.
For a developer to launch a real estate project in the city today, he says, it must first buy the land (and pay for it in full), handover the plot, design the project, issue necessary permits, appoint a contractor, open an escrow account and deposit 20 per cent of the construction budget in it.
According to a recent report by Goldman Sachs Group Inc., concerns that Dubai’s property market is a bubble or heading towards another crash has been exaggerated. It argues that property prices are still 36 per cent below their 2008 peak and new regulations (hike in registration fee) focused on curbing speculation, along with an increasing supply, help keep values down.