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The UAE is emerging as a global destination for overseas investors. From India to China, Saudi Arabia and Lebanon, there has been an increased appetite for its property and with the country now enjoying a prominent place on the world map, the demand for a piece of its real estate is significantly high. Expectedly, a few banks have responded to the needs of non-residents seeking returns from property here.
Political stability, worldclass infrastructure, strong economic outlook and smart banking remain attractive characteristics of the UAE. Despite a decline in oil prices, its economy is on a steady upward trajectory and is expected to grow by 4.5 per cent this year. Much of this is spurred by non-oil investments, trade, retail and services, a maturing real estate market and booming tourism industry. The economic benefits of Dubai hosting the World Expo 2020 are also expected to be spread over the long run.
The overall effect is an influx of highly skilled and in-demand people fuelling growth in sectors such as engineering, tourism, construction, architecture and other real estate-related services. As more job opportunities materialise, the focus has turned to Dubai and the UAE as a destination for resident (nationals and expats) and non-resident investors.
The strong growth of the country’s economy is mirrored by its vibrant property sector. Dubai is the world’s only real estate market that has seen more than 140 nationalities investing in it. According to the Dubai Land Department, Indian investors put in more than
Dh10.5 billion during the first half of last year, while Britons invested Dh5.8 billion.
With the stabilisation and consolidation of the property market, the sector has moved towards realistic and tradable price levels, where both residents and non-residents see an opportunity to come in from both end user and investment perspectives.
In a milestone move last November, the government passed a law enabling overseas investors fromanywhere in the world to invest in the real estate market of Sharjah with leases of up to 100 years. Locational restrictions have been placed with property in new investment areas on the edge of the city centre being available. Earlier, international buyers were restricted to Dubai and Abu Dhabi, but the latest move will open up a new market for non- UAE residents.
The investment climate for non-residents is seen to be lucrative. In an effort to diversify their property portfolios, foreign investors with long-term plans find it pragmatic to buy property in the UAE and let them out. On average, rental yields across the UAE are around 5-6 per cent, which is tax-free.
Additionally, this segment of buyers can take the advantage of various non-resident plans that allow them to purchase residential property here either for investment or as a second home.
Although very few banks offer home finance for foreigners, an increasing number of providers are now keen on changing lending strategies to woo customers. Some of the more prominent players in this sector are Noor Bank, Mashreq and RAKBANK. The Noor non-resident segment, for example, caters to the widest range of customers — from GCC nationals to citizens of G20 countries, as well as Pakistani and Singaporean nationals.
Some time back, the Central Bank introduced new mortgage caps and loan-to value ratios aimed at curbing speculation in the housing market. So buying property for under Dh5 million now requires a minimum deposit of 25 per cent, rising to 35 per cent for property above Dh5 million. For second properties, the minimum deposit is 40 per cent.
For the foreign investor, banks are financing in the range of 50-60 per cent of the property value and profit rates are 4.5-5.25 per cent a year (on reducing balance). Going by global averages, especially in the Asian countries, this pricing can be considered extremely attractive. Institutions such as Noor Bank also offer two- and three-year fixed-rate solutions for non-resident buyers and finance both the salaried and self-employed.
With fierce competition, most institutions keep documentation as simple as possible. The age criteria is in line with residents’ policy — you have to be 21-70 years old, depending on the segment (UAE nationals, GCC, G20, Pakistani nationals, etc.). A few banks also keep an open mind on properties with title deeds and could do away with the requirement of developer listing. They are more relaxed on pre-approval fees and to attract non-resident customers, could even lower the entry barrier a bit.
Banks are trying hard to cut down on red tape for foreign nationals as well. Initial screening can be completed via scanned applications and originals can be submitted at a later stage — before the contract is finalised.
After pre-approval and identifying a property, buyers can arrange for the documents and memorandum of understanding for final approval. They can get a valuation done from abroad by paying online and visit the UAE only once with original papers to sign the final finance documents.
Source: Pawan Dhawan
The author is Head of Home Finance at Noor Bank.