UAE- Sustaining success in home mortgage
Date
9/12/2015 10:22:36 PM
(MENAFN- Khaleej Times)The mortgage rules and cooling measures introduced by regulators and the government have stabilised the real estate industry and helped eliminate speculators from the market according to a top UAE banker.
Noor Bank chief executive officer Hussain Al Qemzi said Dubai has covered a long journey in streamlining its real estate regulations and laws and has come a long way from the initial years of speculation. "Regulations pertaining to home financing introduced by the Central Bank of the UAE came at the right time and has had a balancing effect on the market. These much-needed measures were essential to keep the market regulated and to avoid overheating" Al Qemzi told Khaleej Times on the sidelines of Cityscape Global 2015 which concluded on a high note last week. In October 2013 the central bank introduced new loan-to-value mortgage caps rules under which home loans for expatriates are limited to a maximum of 75 per cent of a property's value while the borrowing limit for Emiratis is kept at 80 per cent for a first investment of less than Dh5 million. For second and all subsequent property purchases - regardless of the property value - the mortgage limit is reduced to 60 per cent and 65 per cent for expatriates and Emiratis respectively. Al Qemzi said the introduction of the home finance caps on finance-to-value ratios have had a noticeable impact on home finance transactions in the country. "The measures to an extent have weeded out speculators. However it has also restricted a large segment of the mid-income population who might have been potential end-users. This group today stands excluded from the opportunity to invest in a home due to the 25 per cent downpayment regulation. However lower prices in affordable housing could offset this" he said. Al Qemzi said Noor Bank's home finance acquisition volumes have grown significantly over the last couple of years and the bank has managed to attain market leadership among the top league of home finance providers on month-on-month acquisitions in Dubai. "Although the overall residential home finance market is moving at a slower pace and has contracted due to a slowdown in the real estate sector at Noor Bank we have managed to increase our market share with our aggressive distribution marketing and innovative product offerings and plans." He said Noor Bank's home finance acquisition volumes have grown significantly over the last couple of years. "The growth in home finance acquisition volumes during January-August 2015 is over 50 per cent when compared to the same period last year" he added. Commercial property financing To a question about offering commercial property financing to diversify the bank's portfolio in the wake of a slowdown in home finance market he said diversification is a key to success. "Diversifying into the commercial property segment is seen as a window of opportunity since this segment was underserved. Noor Bank's initiative to launch commercial property finance comes at a time when the market indicates demand among self-employed businessmen small and medium enterprises and corporates for commercial financing towards the purchase of office space and retail outlets for end-use expansion as well as investments." "With small- and medium-scale enterprises forming the backbone of the economy commercial real estate financing will gain centrestage." Hussain Al Qemzi CEO Noor Bank
Property slowdown Al Qemzi said the property market's slowdown since the middle of 2014 and which has continued this year accelerated due to a number of factors. He said the strengthening of the US dollar against other foreign currencies continuing turmoil in the eurozone and the International Monetary Fund's revised outlook for the global economy have impacted buyer sentiment. "Also a cut in government spending following the decline in oil prices is likely to slow down the pace of demand. It's part of a cycle which markets go through which I also see as a sign of a maturing market" he said. "It's not a repeat of 2008-09. Far from it. The UAE's real estate market is stabilising as buyers take a cautious 'wait-and-watch' approach." To a question he said steady economic growth continued infrastructure spending ample liquidity in the market and affordable new real estate supply will be factors that will help in the property market bouncing back. "Developments in the run-up to World Expo 2020 [in Dubai] are going to trigger real growth in demand. We should see improved traction in the property market by late 2016 and early 2017" he said. Home finance challenges About the major challenges seen in the home finance market he said the effects of a slowdown in the residential property sector is already seen to be spilling over to the financing business as well. "Over the last 12 months we have seen a contraction in the residential financing market which can be attributed to factors including the market cooling measures and general sentiment." He said the home finance market will remain soft for a while due to the slowdown in the real estate sector which will lead to competition heating up in order to grab market share. "Banks view home finance as a low-risk secured asset with a stickiness factor due to the nature and lifecycle of the product and hence we have and will continue to see banks coming out with products variants aggressive pricing plans to entice consumers which will lead to attractive and low cost of financing for consumers." Cityscape Global exposure Al Qemzi said this year's Cityscape was an event that determined the pipeline of future projects all the way up to World Expo 2020 as most developers including the master developers launched - or re-launched in the case of earlier announcements - new projects. "The Middle East's premier property event gave financiers and realtors a closer estimate of the supply of the units and types to units that will be released this year and in the near future." He said the event was conducive to the off-plan financing arena that is currently occupied by a handful of financial institutions such as Noor Bank. Depending on the success of some off-plan projects developers and banks will have a ground to work with on new schemes in such a product offering. "We see Cityscape as an ideal platform for promoting our off-plan offering which is highly competitive and flexible." He said Noor Bank has tie-ups with master developers like Emaar Properties Dubai Property Group Meydan Sobha and the likes on various off-plan and under-construction projects. "Noor Bank is one of the only lenders and financial institutions offering off-plan finance to non-residents from GCC and majority of G20 countries" Al Qemzi concluded. -
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.