Mortgages in Dubai and the Effect of Recession

M G Singh By M G Singh, 16th Jun 2011 | Follow this author | RSS Feed | Short URL
Posted in Wikinut>Money>Mortgages

Dubai is under a recession and this has affected the property boom. Some people who have lost their jobs are finding it difficult to pay back

Dubai and Mortgages

Mortgage is a means of owning a property by paying over a period of time than in one lump sum. During the period the loan is being paid back the organization or the individual who has financed the loan has a lien on the property.
As far as Dubai is concerned the property boom made it difficult for an ordinary buyer to buy a property at one go. Thus the buyers resorted to mortgage of property.
In a mortgage the title of the property vests with the creditor till the loan is liquidated and paid with interest.In the event of a default and nonpayment of the loan the creditor can retain the property for his own use.
In Dubai, the mortgage market got on steam in a big way. However as Dubai is a Muslim country the Shariat cannot be completely ignored. The leaders in mortgages in Dubai are the two companies Amlak Finance and Tamweel.Together these companies have nearly 60% of the market share. The important point is that both work within the ambit of the Shariat law.
As the majority of the residents of Dubai are Muslims and Islam prohibits any kind of interest on loans, the loans are so tailored that they are shariat compliant. The result is that the you are likely to pay a bigger amount as down payment as compared to a conventional mortgage. But the silver lining is that the repayment terms will always be better. Thus even non Muslims sometimes opt for the Islamic variety of mortgage.
However the boom period of mortgages is over as Dubai now reels under a construction recession. According to official figures given out by the government and the Dubai land department the Dubai mortgage market slid down by 73 percent in 2009.

Jesse Downs, director of research and advisory services at Landmark Advisory has carried out an analysis of the mortgage values during the entire 2009. They found that in the month of May the drop was 93% and September the fall was equally steep with 96%.
Landmarks data also shows that approximately 20% of all transactions in 2008 were purchased with a mortgage while the figure for 2009 was also 20%. But the difference was in the volumes which were significantly lower in 2009.

The down slide has caught many persons who had taken mortgages earlier on the wrong foot.With loss of jobs and income and a higher mortgage cost some people are in deep trouble.They can only hope and wait that the situation improves. Some of the foreign expats who had taken out mortgages earlier feel particularly vulnerable as Dubai law means going to jail for non payment of debts- mortgage is a debt.


Shariat, Dubai, Loan, Mortgage, Property

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author avatar M G Singh
A man who spent his early years in Air Force. An avid writer with over 6000 articles and 60 short stories published.Two novels on the anvil for publication.

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