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Dubai Introduces new mortgage law

Catherine Deshayes

The Dubai Government introduces new mortgage laws to try and regulate the market.

Dubai is introducing numerous new laws at the moment, the latest being a new law designed to regulate mortgages, steady the market and boost investor confidence.

The new law makes all mortgage deals that are not registered with the Dubai Land Department null and void, allowing the department to better regulate property and mortgage transactions.

His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, issued Law No 14 for 2008 that regulates property mortgages and the relations between mortgage issuer and the borrower.

The 35-article law includes all procedures concerning a mortgage and its legal effects on the concerned bodies, as well as execution procedures on the mortgaged property, and the relations between the mortgage lender and borrower.

It also regulates relations between both parties involved in the mortgage process, and the Dubai Land Department, which is responsible for implementing the law and ensuring the rights of both parties.

The law excludes properties granted by the Government to UAE citizens for residential and commercial purposes, as those are subject to orders and instructions issued by the Ruler.

The law, which will take effect 60 days after its publishing in the official gazette, stipulates the invalidity of any property contracts that are not registered with the department.

The provisions of the law will be applied to properties for mortgage as property insurance with no difference between full towers or units.

According to newspaper Gulf News, Arif Al Harmi, Chief Executive of mortgage lender Amlak Finance, said, "This is part of the government's initiative to support and regulate the market. It will boost investor confidence."

"It is a positive development and demonstrates that the government wants to regulate and improve the business practices in the market."

"The law will not change the business practices of the existing lenders in the market.

"We have been maintaining the best practices in lending. We make sure that the developer is good, serious and has financial capability to build the project while the borrower has the repayment capacity.

"The Mortgage Law just reiterates the best practices. I'm happy that it has been issued.

"It will definitely boost investor confidence in Dubai's property market.

"We also expect the mortgage rates to come down to a better and more competitive level," Mr Al Harmi said.

The law allows mortgaging of properties from sold off-plan or those that are still under construction, on the condition they are registered with the lands department.

It also allows mortgaging of leased property for a period of no less than 10 years and no more than 99 year.

The law is applied to properties to be mortgaged whether they are full buildings, units, or plots under the property insurance. The law does not differentiate between full towers, units, plots or rights to a property sold on the map.

Under the law, mortgage lender shall be a bank, financial institution or a finance company licensed by the UAE Central Bank to practice the activity of property finance.

The law makes property insurance mandatory, as all property mortgage contracts that are not registered with the land department will be considered invalid.

To see properties for sale in Dubai, check out www.themovechannel.com/property/UAE/Dubai/