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First Salary Credit Accepted as Proof by UAE Banks – Will Others Follow?
Dubai: Are you a newcomer to the UAE? With ambitions to buy a home rather than rent at the first opportunity? Banks in the UAE are gradually realizing the possibilities that these newcomers to the nation might bring in terms of extending their mortgage books.
“Because mindsets are changing when it comes to property buying these new residents see the UAE. As their new home and would rather spend money on buying a home than renting,” the banker explained. “Not only that, but they want to get into the real estate market as soon as possible.” While some prefer an all-cash transaction, a significant proportion of people require a mortgage to finance any home purchase. This is where banks are attempting to help the process along.
According to market sources, loans are granted when the client produces his or her first wage credit data. This is in contrast to the six months of salary records required for a newcomer to the UAE to secure a job. However, according to Michael Hunter, CEO of Holo, one wage credit is “still not the norm.”
“Buyers of (property) who are new to the nation are frequent at the present. A home cannot be mortgaged in the UAE (via lending from an international bank), and some local lenders will need up to six months’ worth of income credits to be shown in their UAE accounts. “For business owners, this can be even more challenging because, in most cases, two years of trading are required.”
Through programs like the first salary credit detail, lenders are attempting to ease this. Banks are aware that by continuing to impose the same standards on loans to new residents, they risk missing potential opportunities.
According to a developer, “Dubai homes are going to continue to get more costly if current patterns on property values remain.” That would imply that in six to twelve months these potential buyers would be priced out of the market.
Can Developers Offer Assistance?
Dubai developers are addressing the needs of new residents by offering low down payments. However, most major developers still follow construction-linked payment structures, allowing buyers to clear outstanding payments over a year or two post-handover. This approach poses challenges for young professionals starting their careers in the UAE. Developers acknowledge the shift in buyer demographics, with a younger audience in their late 20s and early 30s seeking immediate property ownership rather than waiting.
Are Banks Going To Increase The Loan-To-Value?
It may be challenging banks to issue larger loans compared to the property value to new residents who want to become property owners. Even when they are making every effort to be accommodating. It is crucial to remember that the options available to immigrants are not truly getting better, according to Hunter. The same few banks continue to offer better possibilities.
“If a candidate moves to the UAE while working for the same organization they did in their previous country, then this opens up options with some lenders. It will also be helpful if you can demonstrate continuing employment with the same company.
Mortgage Rates Are Rising
The major banks will release their first-half 2023 results in the coming weeks, and these statistics ought to demonstrate increased mortgage approvals. Following a decline in the fourth quarter of 2022 due to the ongoing interest rate hikes, end-user demand for property purchases in Dubai and the UAE is making a strong showing. Now, it does appear that UAE home buyers have adapted effectively to the higher EMIs that are demanded of them. Because they would prefer to buy a house than continue renting. To expand that pool of purchasers by incorporating recently settled individuals in the UAE, banks will just need to make a minor adjustment to their lending procedures.
