Financing an off-plan purchase

The ratio we do not print, and why

Every bank and finance company lending against UAE residential property works inside the Central Bank’s regulations regarding mortgage loans, issued as Circular 31/2013 and amended since. Those regulations set a maximum loan-to-value ratio, and they set a tighter one for property being purchased off plan than for a completed home — the stated reasoning being the long-term nature of the development process and the higher risk to completion.

We do not publish the ratio itself. It is a figure this site has not settled to its own standard, and a stale ceiling on a page like this is worse than no ceiling at all: it gets quoted back to us, and it gets used to size a deposit. Ask your lender, or read the current article in the CBUAE rulebook, and plan the cash from that.

One definitional point does matter regardless of the number, because it catches buyers out. The regulation defines loan-to-value as the ratio of the loan outstanding to the appraised value of the residential property — not the price on your reservation form. Where a valuer comes in below the contract price, the ceiling is calculated on the lower figure and the difference is yours to fund on top of the deposit you had already budgeted.

A second point is an inference rather than a rule, so we flag it as one. The regulation attaches its off-plan treatment to property “being purchased off plans” and does not spell out what happens at completion. Whether a borrower moves onto standard terms once the unit is built and titled is a question for the lender, not something we can state from the text.

What a lender is required to test — and what it may not count

The affordability rules are more prescriptive than most buyers expect, and they are the part of the rulebook a borrower can actually prepare for.

The debt burden ratio is capped at 50% of gross salary and any regular income from a defined and specific source. The regulation goes further and tells lenders not to apply that maximum automatically but to look at the borrower’s specific circumstances. It also requires a stress test: the loan must be assessed at two to four percentage points above the current interest rate depending on where rates sit in the cycle, and where an introductory rate applies the test must use the rate that takes over when the introductory period ends. If the property is for investment, the lender must deduct at least two months’ rental income to allow for void periods. If the repayment schedule runs past expected retirement, the balance outstanding at that point must still be serviceable at a 50% debt burden ratio on post-retirement income.

On top of the ratio there is a hard multiple: the maximum financing amount is 8 years’ annual income for UAE nationals and 7 years’ for expatriates. The maximum tenor of a mortgage loan is 25 years.

A point worth correcting, because stale versions of it circulate widely: the original 2013 circular fixed a maximum age at last repayment of 70 for nationals and 65 for expatriates. Those figures were abolished in 2019 by Central Bank Board Decision No. 96/By Circulation/2019, and the maximum age is now determined by each lender under its own risk management and lending policies. It varies by bank and is a question to ask rather than a rule to look up.

Two further constraints catch off-plan buyers in particular. Repayment must be made from salary, or from verifiable business or rental income; the use of end-of-service benefit is not allowed. And the down payment must be drawn from the borrower’s own resources, not from other sources of borrowing, including personal loans or credit cards — the Central Bank expects lending policies to be explicit about it. Before any irrevocable commitment to lend, the property must also be valued on site by a professional third party who is suitably qualified and independent of the borrower, the seller, the developer or contractor, and the loan decision itself.

How a loan actually reaches a unit that does not exist yet

A bank cannot take a first charge over a finished apartment when there is no finished apartment. Both emirates solve this the same way in principle and differently in the detail.

Abu Dhabi writes the mechanism into statute. Article 52 of Law No. 3 of 2015 permits the buyer of a property right to place his contractual right to an off-plan unit under mortgage in order to settle the sale price, on two conditions: the unit must already be registered in the Initial Real Estate Register, and the lender must pay the debt amount directly into the project escrow account. The mortgage is recorded in the Initial Real Estate Register or the Real Estate Register as the case may be under Article 35, and under Article 32 the lender itself must be a bank, financing company or institution licensed and registered with the Central Bank for real estate financing. Article 37 makes the mortgage effective only on registration.

Dubai reaches a similar place through its escrow law. Law No. 8 of 2007 defines the escrow account as the project bank account into which payments made by purchasers of off-plan units or by the financiers of the project are deposited. Each project must have its own account, dedicated exclusively to construction, and creditors of the developer cannot attach it.

The practical gate in Dubai is registration. The Land Department’s mortgage registration service lists, among the required documents for provisional-sale properties, a no-objection e-certificate from the developer, issued through the Dubai REST app. In other words, on an off-plan unit your developer holds a procedural veto over your mortgage, and that is worth establishing before you commit rather than after. The same service page confirms that non-resident foreigners transact on a passport copy where residents present an Emirates ID — which is a statement about who may be a party to a registered mortgage, not a statement that banks lend to non-residents.

What the loan costs before a single dirham of interest

Registering the mortgage is a separate transaction from registering the sale, with its own published tariff. The Dubai Land Department’s mortgage registration service charges 0.25% of the mortgage value — of the loan, not the property — plus AED 250 for issuance of each title deed where an ordinary or usufruct title deed exists, an AED 10 knowledge fee and AED 10 innovation fee for each drawing, and a service partner fee of AED 4,000 plus VAT. For a provisional, Oqood-registered property the service partner fee is AED 5,000 plus VAT — the off-plan case is the dearer one. The Land Department quotes the service time at 20 to 25 minutes once the file is complete, and the transaction can be filed by the bank electronically or by the buyer at a trustee centre.

In Abu Dhabi the allocation of cost is settled by law even where the tariff is not verifiable from a primary page: Article 37 of Law No. 3 of 2015 binds the mortgagor to pay the expenses and fees of the mortgage and its registration unless otherwise agreed. We have deliberately not quoted an Abu Dhabi mortgage registration percentage. The figures circulating in brokerage guides are consistent with one another, but we could not confirm them against an ADREC, DARI or TAMM page, so ask ADREC for the current schedule rather than relying on a blog.

Budget separately for the valuation the Central Bank requires, and for any arrangement or processing fee the lender charges, which is a commercial term rather than a regulated one.

Rates: the mechanism, not the number

We do not publish mortgage rates on this site and we are not going to start. They move faster than an editorial page can honestly track, they differ by borrower profile, and a stale rate is worse than none. What is stable enough to be useful is the mechanism.

Most UAE variable-rate home finance is priced as a margin over a published benchmark. That benchmark is EIBOR, the Emirates Interbank Offered Rate, defined by the Central Bank as the daily reference rate at which panel banks are able and willing to access dirham funding, in reasonable market size for a given tenor, from the UAE money market just before 11.00 local time. The Central Bank acts as administrator of the benchmark: it controls its provision, collects and analyses the input data and determines the rate. Products are typically quoted as a fixed rate for an initial period, reverting afterwards to the benchmark plus a stated margin — which is precisely why the regulation requires affordability to be tested against the reversion rate rather than the introductory one.

On the way out there is a hard cap that is easy to miss. Since 8 October 2019, following Central Bank Board Decision No. 96/By Circulation/2019, the early settlement or partial settlement fee on home loans is capped at 1% of the outstanding balance or AED 10,000, whichever is less. Your own contract may charge less; it cannot charge more. That single amendment is what makes refinancing and early exit a realistic option in this market rather than a theoretical one.

One more structural rule: mortgage loans with deferred principal repayment — interest-only periods — apply only to investment loans, and may not defer principal for longer than five years from the date of first drawdown.

When the payment plan is the financing

Most off-plan buyers in the UAE do not use a mortgage during construction at all. They use the developer’s own instalment schedule, and it is worth being clear-eyed about what that is and is not.

The Central Bank’s mortgage regulations are addressed to mortgage loan providers — defined in the circular as all banks, finance companies and other financial institutions that provide mortgage loans. A developer’s own deferred-payment schedule is a contractual instalment arrangement rather than a mortgage loan from such a provider, so the loan-to-value ceiling, the debt burden ratio, the stress test and the 1% early-settlement cap are none of them the rules that govern it. What governs it is your sale and purchase agreement and the off-plan law of the emirate.

That trade is not free in either direction. On our own catalogue, 171 of the 1,065 Dubai and Abu Dhabi projects on sale publish at least one plan running past handover, and the median booking step across the two emirates is 20% — a schedule that reaches well beyond what a lender would have tested you for, with none of the affordability machinery above sitting behind it.

In Dubai, the consequence of missing an instalment is statutory rather than contractual: the developer notifies the Land Department, which serves a 30-day notice, and if that expires uncured the developer’s remedy scales with how far construction has progressed. Those percentages are set out stage by stage elsewhere on this site rather than restated here.

What this page is, and what it is not

Impala Real Estate is a licensed brokerage. Arranging or advising on home finance is a separately regulated activity, and nothing above is a recommendation to take a particular product, lender or structure, or a statement about what you personally can borrow.

What this page does is set out the published rules, with a source for each, so you can tell the difference between a bank’s commercial policy and a rule it has no discretion over. The 50% debt burden ratio, the 25-year tenor, the income multiples, the deposit-source rule, the end-of-service exclusion, the independent valuation requirement and the early-settlement cap are regulation. There is a regulated loan-to-value ceiling too, and it is tighter for off-plan — we simply do not publish the figure.

The rate, the margin, the maximum age at last repayment, the arrangement fee, whether a lender will consider a non-resident file, which developers a bank has approved and at what construction stage it starts disbursing are commercial policy, and they differ from one institution to the next.

If you are weighing a specific project against a specific balance sheet, the right sequence is a pre-approval from a bank or a licensed mortgage broker first, and a reservation second — not the other way round.

Questions buyers ask