Mortgage law shake-up on the way

He said the legislation would allow lenders to be more flexible when giving mortgages to expatriates. Earlier, expatriates were not allowed to own properties in the emirate. However, recently they were given the right to purchase in some areas. Many buy with loans, but banks are hesitant to approve such applications as there are not enough safeguards for them. The committee drawing up the law is looking into this issue.

Plus it is difficult for nationals to get a loan to build a house on land granted by the government. The new law will solve this problem. Bose, a contract and commercial specialist at Dar Al Adallah Lawyers and Legal Consultants, said: Dubai s mortgage sector has great potential for growth if an adequate and clear-cut mortgage law can protect the interests of lenders and borrowers in the freehold and leasehold markets.

If banks and financial institutions are confident that such a law would guarantee the recovery of their money, they will sanction mortgages and strengthen the property sector. Some banks are reluctant to enter the market mainly due to the absence of a system governing ownership, specifically property repossession, enforced eviction and asset liquidation in the case of non-payment. Bose said the existing legislation was inadequate and did not address a number of important issues.

It is customary in Dubai that if a borrower has no place to live other than the mortgaged home and is unable to repay, he cannot be evicted since he has nowhere else to go. This is a protection given to the residents. In order to encourage lenders to enter the market their interests should also be considered. Bose made a presentation to Land Department officials in which he said there had been few mortgage defaults in the past three years.