A new mortgage law was issued by HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President of the United Arab Emirates and Ruler of Dubai.
The new law regulates the mortgage process in an effort to protect the rights of lenders and borrowers and improve transparency, Marwan Ahmed bin Ghalita said on Tuesday.
The law, which comes into effect 60 days after its publication in the official gazette, stipulates that mortgage contracts be registered with the land department, specifying the size of the loan, the repayment period and the value of the property to which the loan is linked.
“The new law is basically covering the mortage procedures in Dubai … All property purchases happening offplan for example and all financing must be registered at the land department,” said Ghalita. “Before some were and some were not.”Â Â Â
The law requires that mortgages taken out on properties in Dubai be sold by registered financial institutions, and be insured.
“This is a positive step,” said Usman Rauf, analyst at Prime Group. “As investors you would want as much protection and insure against general risk.”
The law also requires borrower and lender to present full financial documents when the mortgage is registered.
Property granted by the government to nationals is exempt. “It gives more confidence to the lender and gives more security for banks,” Ghalita said, adding that the land department and banks were now working together to calculate mortgage rates independently from the central bank.
Home to flamboyant developments such as palm-shaped islands, tax-free Dubai kicked off a Gulf property boom in 2002 when it invited foreign investors to buy properties.
Dubai’s nascent mortgage business has burgeoned since then, with home loans in the UAE jumping 55 percent in the year to March, according to central bank data.
Dubai property prices have surged 79 percent since the beginning of 2007, Morgan Stanley said this week, adding it expected a 10 percent decline in prices by 2010.
Standard Chartered warned in July that Dubai’s property market showed signs of overheating as speculators betting on quick gains inflate prices of real estate still under construction. It said the government should take steps to weed out short-term speculators to avoid a correction.
Reports of new mortgage regulations come amid a crackdown by the Dubai government on corruption, with executives in major real estate and financial firms facing investigation.