Homefront: 'how can a buyer ensure banks don't undervalue an off-plan property?'

The Dubai resident wants to ensure the valuation matches the original purchase price

Nakheel’s chairman Ali Rashid Lootah moved to take up a new position in Dubai World. Pawan Singh / The National

In the current market I have heard of some newly completed properties being valued by UAE banks at approximately 12.5 per cent less than their original purchase value. The banks will only mortgage 75 per cent of the valued property value. So, how can a buyer ensure the bank approves a 75 per cent mortgage on the original purchase price? Are there any methods to get around this? TK, Dubai 

When the bank issues a mortgage against the purchase of a property it does so by employing the services of a qualified firm of chartered surveyors to do the valuation. As the valuation is concluded by a third party, the bank has no control on the actual valuation price at all.

Chartered surveyors use several methods to ascertain value by speaking to real estate brokers for comparable evidence of other properties sold. They also have access to business-to-business platforms that give accurate sales data including information from the Dubai Land Department. It is important to note that the mortgage valuation is done based on current comparable prices so if newly completed units were perhaps delayed or a considerable amount of time has passed from the date of original sale, it is obvious that there could be a discrepancy in valuation now from then.

For these reasons, there is no guarantee the banks will value the property based on the original price. Having said this, in any competitive market situation there are always things that can be done and banks are no exception to this, they could offer better times when competing for your mortgage business.

You are correct that the banks are mandated to lend 75 per cent of the valuation, so if this leaves a shortfall most banks can also offer personal loans to cover 'extras' such as the agent's commission or governmental fees. This "extra" lending could amount to approximately another 6 per cent so in reality it is possible to cover potentially 81 per cent of the purchase price.

I stress that this potential extra offer is not available from every bank but that is why it is good to shop around. If time is an issue for you, you could get in touch with any mortgage brokerage firm who, after an initial consultation, will search on your behalf for the best deal.

Where can I find an updated list of the laws and regulations for landlords in Abu Dhabi? I've looked online and it all seems outdated. Any advice you have for a landlord who wants to update the terms and conditions on a tenancy contract that follows the law here would be greatly appreciated. MM, Abu Dhabi 

Getting correct information on the different laws can be fairly daunting but I suggest you search the Internet using Law 20 of 2006 Abu Dhabi (in the subject line) - this is the tenancy law. For ease, you can find it by clicking: https://www.ecouncil.ae/en/Official-Gazette/Documents/English-2011/Official%20Gazette%202011%203rd.pdf via the Official Gazette. If after reading it you still have difficulty interpreting it's different clauses, I suggest you contact a competent law firm, which I'm sure will be able to clarify any questions you have. This article may also be of interest: https://www.stalawfirm.com/public/uploads/downloads/Abu_Dhabi_Real_Estate_Guide.pdf;  it is from a law firm explaining the tenancy law of Abu Dhabi including all of its amendments.

Mario Volpi is the sales and leasing manager at Engel & Volkers. He has worked in the property sector for 35 years in London and Dubai

The opinions expressed do not constitute legal advice and are provided for information only. Please send any questions to [e-mail]