Dubai’s New Mortgage Law Set to Open Funding Avenues for the Country’s Growing Real Estate

Dubai’s real estate sector has constantly reinvented the wheel, catering to the region’s need for a versatile bouquet of financial services to meet increasing demands. Innovation, digital strategies and disruption have been the country’s clarion call as a part of the Smart Dubai 2021 initiative. By extending this into the financial sphere through the new mortgage law, the government envisions greater investment and alternative funding avenues for the city’s real estate sector.


Seamless, safe, efficient and impactful are the four pillars on which Dubai’s phenomenal growth is structured. The government’s application of these tenets across public and private sectors has optimized service efficiency. Innovation, cutting edge technology and disruptive models have impacted various spheres, with the most significant disruption seen in the real estate space.


Globally, Dubai is increasingly perceived as a free economy and one of the friendliest city’s to work or do business in. Dubai’s supportive and progressive leadership, which has enabled the creation of world-class infrastructure and a unique legal and commercial framework, makes it easy for people to do business, set up companies and invest in real estate. With people from across the world making this city their home, the demand for property is perennially high. 2017 saw buildings, land and units sale total Dh114 billion through 49,000 transactions, while mortgages totalled Dh138.5 billion through 15,700 transactions for the same three categories.


Given the enormous potential of this sector, the Dubai Land Department (DLD) – as a part of the Smart Dubai initiative – has proposed a new mortgage and finance law. This law regulates and ratifies many financial irregularities that currently exist in the real estate sector. With a thrust to raise more capital, the law hopes to attract foreign investment and Nasdaq listed public joint stock companies from across the world. The existing real estate funding landscape makes it difficult for non-residents to buy property in UAE because of reduced bank financing and complicated procedures, which is all expected to streamline once the new law comes into effect.


The new mortgage law is expected to improve financial liquidity, making it easy for small and mid-cap entities to make property investments, as well as helping homebuyers realize the dream of owning their dream-homes. Formation of ‘Real Estate Investment Trusts’ (Reits) – which currently accounts for 5% of Dubai’s listed real estate – will enable integration of real estate with capital markets. Besides this, property developers can deliver projects faster, expand further, attract better foreign investment and provide investors with diversified, small ticket investment instruments.


While the new law is being touted as one that will bring greater clarity and definition to the property space, the new avenues that will open up for home financing operations, with dedicated mortgage institutions in a structured format, are also expected to significantly boost the slightly sluggish real estate sales.


Regulation has always brought in better accountability in Dubai, and with this law the real estate sector will only benefit positively. Since the mortgage industry is still in a nascent stage, this law is a big leap forward in protecting the interests of buyers, providing greater regulation and better transparency.

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