The situation on ground with regards to mortgage on granted land creates a win-win situation. Dubai is currently allowing mortgages on land given as grants. With regards to the banking sector, it means that the user base for its disbursal has expanded significantly. Also, it allows granted plots, principal UAE nationals, to develop on them without relying on their own equity.
On a logical conclusion, this means a quicker turnaround times on plot developments. Even though mortgages are available, the granted land will not have to rely on fund as they go along the schemes to get their projects completion. Also, in the past the on-the-fly financing have led to delayed projects.
It has also been estimated that the Dubai Decree on mortgages for granted land could be a game changer for banks in the long term. Banks in Dubai are known to have relied on lending against property rather than land.
“Historically, banks have not been eager to mortgage land because there were no mechanisms in place to ensure that repayment would be based on the development of the land itself. They had to have visibility on income sources. Where a mechanism was imposed, it was ‘bilateral’, thus making it a tedious task. With the Decree, there comes a ready-made mechanism to be imposed across the board. This allows banks more visibility on what they are lending into, and thereby accelerate the whole process.” said Sameer Lakhani, Managing Director at the consultancy Global Capital Partners.