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January 20, 2016 | 13:00 | Dubai
Given the volume of residential supply planned across Dubai over the next few years, a reform in mortgage regulations to permit non-resident loans (unrestricted) and a reduction in deposit requirements (for qualifying customers) could be an option to stimulate residential demand, Deloitte said in its second annual Real Estate Predictions Report for Dubai.
The lifting of sanctions on Iran also presents potential opportunities for Dubai in 2016, Deloitte said. “The release of capital currently in Iran is likely to prompt an inﬂux of investment to safe haven markets from which Dubai may beneﬁt, as well as the opportunity for Dubai to act as a gateway for business into Iran,” it said. Deloitte predicts that for 2016, lenders will continue to carefully scrutinize their real estate exposure, particularly for speculative development. Non-recourse structures are likely to be limited to projects and investments with quality tenants and long term, reliable rental ﬂows with lenders requiring greater equity contributions (in addition to land) and other forms of security to support higher-risk lending.
“With the prospect of base rates increasing over the next 12 to 18 months, we predict that the hedging of benchmark interest rates will become more common in ﬁnance packages,” the report said. Further, following a signiﬁcant number of project launches during 2015, contributing to a strong residential pipeline for Dubai, Deloitte predicts that the focus in 2016 will turn to project delivery. It also predicts further decrease in average residential sales prices in 2016 reﬂecting a transition to a more mature market as well as an increase in more affordable stock and discounting in emerging locations. Deloitte also foresees that developers with limited track records in delivering residential projects in Dubai will increasingly compete for sales, with payment plans weighted towards handover and beyond.