Emirates: Question: Is it legally permissible to purchase property with a zero per cent down payment? A few real estate agents have offered me this option for properties in Dubai, but I’d like to understand whether it’s actually allowed under UAE law.

Answer: Pursuant to your queries, the provisions of the UAE Central Bank mortgage regulations shall apply.

In the UAE, generally by practice, while purchasing a property through mortgage finance, the Central Bank of UAE regulations stipulate that banks and financial institutions must ensure a minimum buyer contribution.

Article 3 of the UAE Central Bank Regulations on Mortgage Loans (Notice No. 226/2013) states that:

“The maximum Loan to Value (LTV) ratio are as follows:

A. UAE Nationals

• First house/owner occupier: Each borrower can only claim one property under this category.

a. Value of property less or equal to Dh5 million — maximum 85 per cent of the value of the property.

b. Value of property more than Dh5 million — maximum 75 per cent of the value of the property.

• Second and subsequent house or investment property: 65 per cent of the value of the property, regardless of value.

B. Expatriates

• First house/owner occupier: Each borrower can only claim one property under this category.

a. Value of property less than Dh5 million — maximum 80 per cent of the value of the property.

b. Value of property more than Dh5 million — maximum 70 per cent of the value of the property.

• Second and subsequent house or investment property: 60 per cent of the value of the property, regardless of value.

C. All Categories — Property purchased off plans

Given the long-term nature of the development process and the higher level of risk to completion, the maximum LTV for mortgages on property being purchased off plans is 50 per cent regardless of purpose, value, or category of purchaser.”

Therefore, any “zero percent down payment” offer is not legally permitted when financing through a bank mortgage, as the buyer’s contribution is mandatory under Central Bank rules.

However, it may be permissible if a real estate property developer offers a payment plan to potential buyers, where a buyer only pays instalments directly to the developer without a mortgage.  Such developer financing or easy payment plan is commonly applicable for off plan sales and is not considered a bank loan. It may fall outside the aforesaid Central Bank of the UAE mortgage regulations.

It is, however, important to fully understand the payment schedule and handover terms; and whether there are any hidden finance charges levied by the real estate property developer.