Dubai is set to tighten its rules on bank loans for property buyers. Starting February 1, banks will only lend money based on the value of the property itself, with no extra amounts for department fees or brokerage. The Dubai Land Department will end the practice of adding loans for these additional costs, which had been around 6 percent of the property price.
For instance, on a property worth one crore dirhams, buyers were receiving an additional 6 lakh dirhams for these fees and commissions. Now, without this extra loan, buyers will need to cover that amount themselves.
This move is part of the government’s push to control rising real estate prices, and it’s already sparking some chatter in the market. Many experts are speculating that this restriction could lead to a drop in property prices.
Previously, buyers could borrow the money needed for fees, which made purchasing property less of a financial burden. With this option gone, some think there could be a slight slowdown in the market, as buyers will now have to come up with more money upfront.
On the other hand, it’s not all bad news for everyone. Farooq Saeed, CEO of Springfield Properties says, "New real estate projects may not see much of an impact. For newly built properties, these fees don’t need to be paid upfront, so buyers won’t feel the pinch as much."
However, he points out that the secondary market—where properties are resold—could face some challenges. With buyers needing to fund these additional costs out of their own pockets, demand might decrease. There were already concerns that the rise in transactions in this secondary market was partly driving up property prices in Dubai.
