UAE property finance industry maturing fast (page 2 of 2)

That's six million dirhams, over 25 years - tell me, which middle income person can afford to pay twenty thousand dirhams per month?"

On the same issue, one respondent in a previous survey conducted by DSL Exhibitions said that in the UK, average mortgage repayment as a percentage of average household income has remained between 15% and 20% for the last 20 years*, never exceeding 25%. "If the same conditions are replicated in Dubai, most people will prefer it to buy properties on mortgage than rent homes," he said.

>b>3. Are the products innovative enough and serve the needs of the consumer?
Most respondents agreed that the property finance industry has still to mature here by offering both innovation and flexibility. Nearly 70% (16 out of 23) respondents agreed that the market is still in its infancy. Mature mortgage products such as interest only mortgages and hybrid adjustable rate mortgages that allow purchase of insurance against interest rate risk are still unavailable here, although Tamweel's 'Yusr' and HSBC's 'flexi home loan' were cited by some respondents as indicators that the market is moving towards sophistication.

Owen Belman, Head of Consumer Banking, Standard Chartered Bank said: "Standard Chartered Home Loans are carefully designed to offer customers the financial support they need with the maximum convenience and choice. That's why we have partnered with leading real estate developers to provide our customers with a wider range of property options to choose from."

However, lack of consumer knowledge, both about the intricacies involved in evaluating a mortgage plan as well as comparing apples to apples was stated as a reason why mortgage companies are not being 'pushed' to introduce such products.

4. Is there a danger of a large number of mortgage defaulters dragging down the banking system into meltdown? Do you think the industry is being adequately regulated in this regard?
The answers in this segment were as varied as the respondents. While 6 of the respondents said they did not have enough knowledge about this to comment on it, 12 respondents said they were 'sure' that the authorities were doing enough to prevent a collapse in the mortgage market and its adverse repercussions on the banking industry. However, there were a number of interesting observations and comments by others.

Aniruddh Saxena, a banker, said that 100% finance was a dangerous trend, which - if offered on too many transactions and properties - could have serious repercussions for the economy as the bank's exposure is too high in such a deal - "80 to 90% is the maximum that should be allowed," he said. Another respondent, who declined to be named, said the mortgage industry should be more actively regulated as this would "stop financial delinquency at its source." Gabriele Al Butti said that stricter regulation should also be placed on developers to not hike up the price of the property after the sale and mortgage deals are signed and sealed - such instances have been reported by the media in the past and this kind of unethical practice can "have the greatest impact on a mortgage's fulfillment or failure," she said.