As the Dubai property market heats up and real estate prices surge at the steepest rate in the world, international investors are eager for a piece of the action.
But there is just one small problem: getting a mortgage.
Bryan Ong, the director of a private tuition company in Singapore, said he began looking for bank financing this year to fund investments in Dubai's property market, which he said looked attractive.
"Initially it was because of the high rental income," he said. "However, after knowing that they do not finance overseas buyers, I put my investment on hold."
Preferring to finance his purchase with a mortgage rather than cash, he deferred his plans.
Banks, stung by Dubai's property crash of 2009, have largely ceased underwriting mortgages to overseas buyers, whose missed payments are more difficult to collect because of limited legal recourse.
What had been a profitable business while markets were rising quickly became a source of bad debts when the property bubble burst.
With property prices on the increase again, banks said they are still wary.
"We don't finance overseas buyers," said Suvo Sarkar, the general manager of retail banking at Emirates NBD. "At this point we don't believe the economics stack up."
Lending to overseas buyers comes with a multitude of additional costs for banks.
Documentation becomes more difficult, as does establishing sources of income for customers of certain nationalities.
A customer default can be problematic, as a UAE bank is likely to have little recourse over a buyer in another country. By law, a mortgage held by a UAE resident must be secured with a cheque.
"We've done it in the past," Mr Sarkar said. "We used to do it pre-crisis, but post-crisis we tightened the policy and we haven't opened it up just yet."
Overseas buyers are still out there with swelling purses, but they are forced to pay out of pocket instead of using bank financing.
Banks and estate agents estimate cash buyers account for between 70 and 80 per cent of the current transactions in the property market, helping to drive a sustained recovery in UAE real estate.
Rental rates for one-bedroom apartments in Dubai have increased by about 30 per cent in the past year, according to Knight Frank.
Although banks said mortgage transactions have recently picked up, Central Bank data shows that the value of outstanding mortgages on banks' balance sheets contracted in the first quarter of this year by Dh3.8 billion to Dh155.9bn, the biggest dip since the first quarter of 2011. It was also the third consecutive quarter of declines, the data showed.
Cash buyers' purchases of distressed properties originally financed by mortgages have been cited as a factor behind the declining amounts of home loans outstanding. In the meantime, banks are not underwriting enough new mortgages to keep up as interest rates plumb historic lows.
But most banks are already averse to taking risks on mortgages to overseas buyers - and brokers have to work hard to persuade them, said Sam Wani, the general manager of Independent Finance, the mortgage adviser.
"We try to avoid taking non-residents," he said. The company makes exceptions in certain cases, such as salaried staff in governments or big blue-chip companies that can provide tax returns and bank statements.
In the past year, Mr Wani says the majority of overseas customers have come from India or the UK, with Russians, Iranians, Syrians and Egyptians also accounting for a significant proportion.
The biggest problem is that income levels can be "difficult to authenticate", Mr Wani said, particularly in countries where tax systems are less robust.
"If you're from Kenya or even Russia, it's almost impossible to get a mortgage approved for non-residents. They have almost non-existent tax regimes," he said. "Getting a mortgage for a non-resident from the UK is much easier."
Emirates NBD said its aversion to overseas buyers may change as the UAE's legal infrastructure strengthens and it becomes easier to recover overdue payments.
"We'll be reviewing our policy in the near future," Mr Sarkar said.
"It's a question of what sort of growth we'd want in our book, from a credit appetite perspective."
business@thenational.ae
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
Moon Music
Artist: Coldplay
Label: Parlophone/Atlantic
Number of tracks: 10
Rating: 3/5
Emergency phone numbers in the UAE
Estijaba – 8001717 – number to call to request coronavirus testing
Ministry of Health and Prevention – 80011111
Dubai Health Authority – 800342 – The number to book a free video or voice consultation with a doctor or connect to a local health centre
Emirates airline – 600555555
Etihad Airways – 600555666
Ambulance – 998
Knowledge and Human Development Authority – 8005432 ext. 4 for Covid-19 queries
Napoleon
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Company%20Profile
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COMPANY%20PROFILE
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MATCH INFO
Uefa Champioons League semi-final:
First leg: Liverpool 5 Roma 2
Second leg: Wednesday, May 2, Stadio Olimpico, Rome
TV: BeIN Sports, 10.45pm (UAE)
RESULTS
5pm: Maiden (PA) Dh80,000 1,200m
Winner: Ferdous, Szczepan Mazur (jockey), Ibrahim Al Hadhrami (trainer)
5.30pm: Arabian Triple Crown Round-3 Group 3 (PA) Dh300,000 2,400m
Winner: Basmah, Fabrice Veron, Eric Lemartinel
6pm: UAE Arabian Derby Prestige (PA) Dh150,000 2,200m
Winner: Ihtesham, Szczepan Mazur, Ibrahim Al Hadhrami
6.30pm: Emirates Championship Group 1 (PA) Dh1,000,000 2,200m
Winner: Somoud, Patrick Cosgrave, Ahmed Al Mehairbi
7pm: Abu Dhabi Championship Group 3 (TB) Dh380,000 2,200m
Winner: GM Hopkins, Patrick Cosgrave, Jaber Ramadhan
7.30pm: Wathba Stallions Cup Conditions (PA) Dh70,000 1,600m
Winner: AF Al Bairaq, Tadhg O’Shea, Ernst Oertel
Farasan Boat: 128km Away from Anchorage
Director: Mowaffaq Alobaid
Stars: Abdulaziz Almadhi, Mohammed Al Akkasi, Ali Al Suhaibani
Rating: 4/5
COMPANY PROFILE
Initial investment: Undisclosed
Investment stage: Series A
Investors: Core42
Current number of staff: 47
Section 375
Cast: Akshaye Khanna, Richa Chadha, Meera Chopra & Rahul Bhat
Director: Ajay Bahl
Producers: Kumar Mangat Pathak, Abhishek Pathak & SCIPL
Rating: 3.5/5
COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
The specs
Engine: 2.4-litre 4-cylinder
Transmission: CVT auto
Power: 181bhp
Torque: 244Nm
Price: Dh122,900
How to join and use Abu Dhabi’s public libraries
• There are six libraries in Abu Dhabi emirate run by the Department of Culture and Tourism, including one in Al Ain and Al Dhafra.
• Libraries are free to visit and visitors can consult books, use online resources and study there. Most are open from 8am to 8pm on weekdays, closed on Fridays and have variable hours on Saturdays, except for Qasr Al Watan which is open from 10am to 8pm every day.
• In order to borrow books, visitors must join the service by providing a passport photograph, Emirates ID and a refundable deposit of Dh400. Members can borrow five books for three weeks, all of which are renewable up to two times online.
• If users do not wish to pay the fee, they can still use the library’s electronic resources for free by simply registering on the website. Once registered, a username and password is provided, allowing remote access.
• For more information visit the library network's website.
SERIES SCHEDULE
First Test, Galle International Stadium
July 26-30
Second Test, Sinhalese Sports Club Ground
August 3-7
Third Test, Pallekele International Stadium
August 12-16
First ODI, Rangiri Dambulla Stadium
August 20
Second ODI, Pallekele International Stadium
August 24
Third ODI, Pallekele International Stadium
August 27
Fourth ODI, R Premadasa Stadium
August 31
Fifth ODI, R Premadasa Stadium
September 3
T20, R Premadasa Stadium
September 6
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Moonfall
Director: Rolan Emmerich
Stars: Patrick Wilson, Halle Berry
Rating: 3/5
Squid Game season two
Director: Hwang Dong-hyuk
Stars: Lee Jung-jae, Wi Ha-joon and Lee Byung-hun
Rating: 4.5/5
COMPANY PROFILE
Name: Qyubic
Started: October 2023
Founder: Namrata Raina
Based: Dubai
Sector: E-commerce
Current number of staff: 10
Investment stage: Pre-seed
Initial investment: Undisclosed
UAE currency: the story behind the money in your pockets
Cricket World Cup League 2
UAE squad
Rahul Chopra (captain), Aayan Afzal Khan, Ali Naseer, Aryansh Sharma, Basil Hameed, Dhruv Parashar, Junaid Siddique, Muhammad Farooq, Muhammad Jawadullah, Muhammad Waseem, Omid Rahman, Rahul Bhatia, Tanish Suri, Vishnu Sukumaran, Vriitya Aravind
Fixtures
Friday, November 1 – Oman v UAE
Sunday, November 3 – UAE v Netherlands
Thursday, November 7 – UAE v Oman
Saturday, November 9 – Netherlands v UAE
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THE TWIN BIO
Their favourite city: Dubai
Their favourite food: Khaleeji
Their favourite past-time : walking on the beach
Their favorite quote: ‘we rise by lifting others’ by Robert Ingersoll
Mobile phone packages comparison
The specs: 2019 Mercedes-Benz C200 Coupe
Price, base: Dh201,153
Engine: 2.0-litre turbocharged four-cylinder
Transmission: Nine-speed automatic
Power: 204hp @ 5,800rpm
Torque: 300Nm @ 1,600rpm
Fuel economy, combined: 6.7L / 100km
