Can Abu Dhabi learn from the Dubai home loan experience?

Barely two weeks since the start of the first ground works for apartment towers for sale in Abu Dhabi, and this emirate has already learned valuable lessons from the participation of its banks in the burgeoning Dubai home loan market.

Abu Dhabi Commercial Bank is presently offering one of the most competitive mortgage deals in the UAE, with a tenor of up to 25 years, up to 90 per cent of the property value and some of the lowest total monthly repayments in the market.

And critically you will not face a stiff early repayment fee from ADCB if you decide to pay off the mortgage early which is not the case with some Dubai lenders, although international banks like HSBC and Lloyds TSB do not have these charges either.

Abu Dhabi lenders

Other Abu Dhabi based banks offering mortgages include the National Bank of Abu Dhabi and Union National Bank. NBAD also lends over 25 years to nationals and expatriates, while the UNB limits expatriates to 20 years.

Not surprisingly there are presently more mortgage products available from Dubai based financial institutions than in the UAE capital city. One recent survey named 10 locally based Dubai home loan lenders and four international banks, Lloyds TSB, HSBC, Barclays and Standard Chartered.

Both Amlak Finance and Tamweel have established offices in Abu Dhabi ready to catch the mortgage boom when it happens. But the construction boom in Abu Dhabi is more than five years behind Dubai so this will not be an immediate phenomenon.

However, it makes good sense for mortgage companies to set up now in Abu Dhabi, both to provide loans to nationals and expatriates looking to buy in Dubai, and to be present when the emirate's own property is completed for occupation.

99-year leases

Mortgage lenders are also not worried by the 99-year leasehold tenure that is the only form of ownership on offer to non-nationals in Abu Dhabi. Many prime real estate markets, for example Central London, operate with this type of ownership structure.

Indeed, the clear division between the respective responsibilities of the freehold landlord and the leaseholder is generally considered an advantage in mortgaging multiple occupancy residences. That is why HSBC currently does not offer mortgages on Dubai apartments, for instance, and is awaiting a new law before offering this service.

In short, the conclusion is that Abu Dhabi has nothing to learn from Dubai about mortgages and can in fact provide some sound advice for Dubai in terms of eliminating early mortgage repayment fees and providing a legal structure that makes mortgaging multiple occupancy apartments easy.