Obtaining a mortgage in Dubai is getting easier and easier. When freehold property was first released, you had just two choices: Amlak or Tamweel. These days almost every major bank in the UAE offers financing options to people looking to enter the Dubai real estate market. Now, this is a big step for the Emirate, and a necessary one given the sheer amount of projects that are available on the market, but is home financing a bigger topic than many think?

One thing to point out is that the interest rates on mortgages are higher than usual. Well-established markets such as in the United States or United Kingdom are characterized by low interest rates, but in comparison to the UAE, borrowers are easier to judge. Over here, people tend to move around so much it’s sometimes hard to keep track of who’s living here and who’s moved away. That obviously makes loaning money out a harder task. There is no way to truly keep track of people here as residents often only live here for a few years before moving on, and with loans of several million being lent out, that does make defaulting on a loan quite a severe problem – hence the higher lending rates.

Perhaps another great feature of mature markets is a credit rating system where borrowers are given a credit score based on their previous history which helps banks to determine if offering them a loan is a good or bad idea. I mean, would you give a loan to an individual that has defaulted on previous loan payments? No, its just too high a risk. So when property is big business in Dubai and there are more high risk investors here than you can shake a stick at, they should really introduce a system like this.

It turns out its already being implemented with the creation of Emcredit, the first independent credit bureau in the UAE. The introduction of Emcredit is sure to encourage the buying of Dubai property, and with cooperation from the leading banks of the UAE, it should help establish a better system of lending and borrowing that is beneficial to both sides. Banks will have more information on investors looking for loans, which in turn will push down interest rates and borrowers will get better terms on their mortgage repayments.

It really is good to see such a recent push for improvements in the Dubai real estate market. With new laws, new procedures and now a credit scoring system, this all seems aimed at promoting the Emirate as a viable place to invest in.