Dubai Land Department Overview

Dubai Land Department (DLD)

• Established in 1960 to oversee land and property affairs in Dubai
• Aims to register lands and properties systematically, safeguarding rights
• Vision: to become the global leading real estate environment to attract investments
• Mission: to create a real estate environment applying international best practice standards to guarantee all stakeholders rights and contribute to societal development

Real Estate Regulatory Agency (RERA)

• Established in 2007 by Sheikh Mohammed bin Rashid Al Maktoum
• Supported by the Dubai Land Department, RERA plays a key role in regulating Dubai's real estate scene
• Registered all real estate development and brokerage companies in Dubai
• RERA's role: licensing all real estate activities, managing developer trust accounts, licensing and organizing real estate agents, regulating rental agreements, and supervising the owners associations
• RERA also regulates real estate advertisements in the media
• Foreign nationals can own freehold property in designated areas approved by the Ruler of Dubai
• Currently, there are over 24 designated areas approved for foreign ownership.

Usufruct Rights

• Owner of a building, unit or plot can enter into a usufruct agreement with a tenant, allowing the tenant to use the leased property in its original condition, subject to fair wear and tear
• Usufruct is typically terminated upon expiry of 50 years unless otherwise agreed
• Other termination grounds include destruction of the leased property, waiver by the usufructuary, termination by a court order due to misuse

Musataha Rights

• Similar to usufruct but grants the musataha holder an additional development right.
• Maximum term is 50 years unless otherwise agreed
• Either party has the right to terminate the musataha by two years prior notice
• Payment default over a period of two years can also lead to termination

Long Term Lease (Leasehold)

• Lease period is more than 10 years and up to 99 years
• Cannot exceed 99 years and must be registered with the Dubai Land Department
• Tenancy Laws don't apply to long term leases and the Rental Dispute Settlement Centre has no jurisdiction

Rules on Real Estate Ownership

• UAE and GCC nationals and wholly owned companies can acquire all types of real estate interests anywhere in Dubai
• Foreign nationals can own freehold and all other types of interests including Musataha, usufruct, and Leasehold in the specific “Designated areas” for foreign ownership

Credit Bureau

• Collects credit information on individuals and supplies it to creditors
• Collects and synthesizes information about an individual's credit score
• Credit bureaus do not decide the decision to lend

Licensing Requirements (Consultants and Brokers)

• Licensed by the Real Estate Regulatory Agency
• UAE or GCC nationals:
  • Certified Mortgage Broker course
  • Bachelors degree in Economics, Finance or Accounting
  • 2 years experience in Real Estate
  • Certificate of good conduct from Dubai Police
• Expatriates:
  • Certified Mortgage Broker course
  • Bachelors degree in Economics, Finance or Accounting
  • 3 years experience in Real Estate
  • Residency under same company
  • Certificate of good conduct from Dubai Police

Foreign Company Branch

• Copy of trade license
• Parent company must be in business for more than 2 years
• Corporate Articles of Organization
• Board resolution to open a branch and name a branch manager
• Branch manager must meet license requirements
• Local service agent required
• Branch activity must be similar to parent

RERA License

• Documents should be notarized by the UAE embassy overseas, ministry of foreign affairs in Dubai and translated into Arabic
• Activity fee of AED 5000 per annum

Licensing

• Issued by Dubai Government, Department of Economic Development (DED)
• Renewed annually
• Regulated by RERA
• Increasing regulation
• Must have own business premises
• Staff must have work visas

Being Truly Independent

• Broad range of banks & products
• Understanding the whole mortgage market
• Following “best advice” principles
• Full product disclosure
• Impartial and not bank or real estate biased
• Client suitability, not commission biased

Knowledge of Banks & Products

• Understand bank policies, products & product parameters
• Qualification criteria - Income, LTVs & restrictions
• Documentation requirements
• Package requirements - originals, email scans
• Turnaround times
• Individual bank quirks
• Drill down on top 3-4 banks – 90% of your business
• Knowledge of the whole market
• Create a bank & product matrix

Potential Business Sources

• Website
• Advertising - Internet, Events, Media & Flyers
• Public Relations
• Referral Sources - Real Estate Agencies, Developers & IFAs
• Customer get Customer
• Word of Mouth

Follow Up Marketing

• Email
• Thank you/closing gifts
• Ask for feedback & referrals
• Become their “go-to” person
• Get testimonials
• Act upon negative feedback
• Lead Management
  • Introduction
  • Prequalification & KYC
  • Research
  • Clear communication (verbal & written)
  • Contracting
  • Agree next action & contact
  • Gaining commitment to meet
  • Send a proposal

Case Study 1a - Fact Finding - Mr Barlow

• Emirates Airline Captain of 4 years
• Aged 40 and single
• No liabilities, earns 30k per month
• Buying in Shoreline for 2.8m
• Has 25% deposit + fees

Case Study 1a – Mr Barlow Profile

• Ethics are NOT feelings
• Ethics are NOT compliance
• Ethics are similar to but NOT the same as values
  • Ethics refer to honesty, fairness and justice
  • Values refer to what’s important to you

Ethics is…

• The study of principles which indicate:
  • How we should behave
  • Our moral duties and virtues
  • Ability to discern right from wrong

Professional Conduct

• Avoid using others for profit through coercion or deception
• Use your business practices to contribute to the development of rational and moral capabilities
• Are you willing to put your career on the line to ‘do the right thing’? Sometimes being ethical means taking a calculated risk

Parting Thoughts on Ethics…

• There is no “right” way to do the wrong thing!

What is Mortgage Fraud?

• The misrepresentation or concealment of material facts to improperly influence mortgage loan underwriting
• Concealment of material facts could include:
  • Material misstatement
  • Misrepresentation
  • Omission

Borrower’s Role in Mortgage Fraud Schemes

• Knowingly supply false information on the loan application
• Partnering with industry professionals
• Altering or falsifying income and employment information
• Hiding debt
• Misrepresenting sources of down payment

Module 1: SAFE Ethics - Introduction to Mortgage Fraud

• Attributes of Fraud for Property
  • Borrower misrepresentations
  • Intends for loan application to appear strong
  • Borrower usually does not qualify
  • Borrower intends to pay
  • Purpose is to obtain a loan

Mortgage Advisors

• Falsify documents to secure client loans
• Knowingly assist fraudulent applicants
• Actively encourage clients to omit or misrepresent
• Influence bank personnel and appraisers
• Fraud for profit
• Can be the biggest initiators of mortgage fraud

Banks

• Falsifying applications and documents
• “Turning a blind eye”
• Influencing appraisers
• Taking bribes
• Assisting borrowers in taking advantage of loop-holes in policy or processing
• Deceiving clients by misrepresentation of product

Appraisers/Valuers

• Overvalue properties to allow cash-out deals
• Adjust sales price to equal appraised value
• Commit fraud for the promise of additional work
• Substantiate reports that improvements were made

Inflated Appraisals/Appraisal Fraud

• Intentionally appraised with a higher-than-market value
• Appraisers, brokers and borrowers may act in collusion
• Brokers & Banks use only one appraiser

Accountants

• Falsify documents required by lenders to qualify loans
• Rewarded with profits or promised continued business

Real Estate Brokers

• Falsifying documents
• Creating multiple sales contracts
• Hiding charges and commissions
• Paying POAs
• Influencing appraisers

Key Indicators of Mortgage Fraud

• Higher-than-typical commissions and bonuses paid to mortgage brokers and appraisers
• Fraudulent loan applications & documentation
• Higher than market appraisals

Mortgage Fraud

• Fraud for property - where the borrower commits fraud to obtain a property they might not otherwise qualify for - Borrower intends to make the payments
• Fraud for profit usually involves more than one industry insider. Goal is profit from artificially high price by selling for more than it is worth

Data Protection

• Laws in “infancy” stage
• Legislation only enacted in DIFC (based on UK)
• A number of Government initiatives aimed at developing greater regulation
• Statutory offence for:
  • Publication of private matters
  • Disclosure of private information
• Various sectors, such as telecoms implementing data protection methods

Misuse of Data

• Buying or selling company data
• Downloading and taking data from your company
• Passing client details without their consent
• Cold calling
• Email-blasting
• Discussing client information with third parties

Module 2

• End

Module 3

• Mortgage Products & Bank Policy
• Module 3 Content:
  • UAE Mortgage Products
  • Interest Rate Options
  • Bank Policy
  • Debt Burden Ratio (DBR)
  • Restricted Segments
  • Mortgage Documents & Process
  • Insurance

UAE Mortgage Products

• Mainly “Vanilla” mortgage products:
  • Capital & Interest
  • Interest Only
• Banks & Lenders offering:
  • Islamic Finance
  • Conventional Mortgages
  • Both

New Purchase

• Secondary Market Purchases
• Primary Market Purchases
  • Valuation may not be required
• Completed Properties
• Under Construction Properties

Commercial Mortgages

• Limited number of properties:
  • Retail, Office & Warehouses
• Higher rates
• Higher costs
• Maximum tenure of 10-18 years
• Offered in personal or company name

Under Construction Properties

• Financing stopped in 2009 (post correction)
• Banks have re-opened this segment
• Mainly Emaar and other Master Developers
• Payment Plans:
  • Buyer has to pay first 50%
  • Banks offer interest-only plans during construction

Refinance (Buy-outs)

• Dominating the mortgage market from 2013
• Reasons Why:
  • Interest rate decline - encourages refinance
  • More lenders
  • Slower property sales
  • Increased value of properties from 2010
  • Lenders can see a borrowers track-record
  • Credit history (AL-Ittihad Bureau)
  • Central Bank Mortgage Regulation

Equity Release

• Release gains made since 2010
• Make capital work harder
• Use equity to upgrade
• Business expansion
• Buy investment property
• Not all banks willing to provide Equity Release

Interest Rate Options

• Bank Variable
• EIBOR-Linked Variable
• Fixed Rates – vary from 1-5 years
• Conventional & Islamic versions

Bank Policy

• All Banks have different lending policies
• Greater alignment since CB Mortgage Regulation
• Policy influenced by bank strategy & appetite to lend
• Banks do not share full policy details
• Innovation is key

Policy Factors

• Target Segments
• Restricted Segments
• Qualifying Criteria
• Documentation
• Process
• Properties
• Type of loans
• Risk Management
• Pricing

Interpretation of Regulations

• Banks interpretation of regulations differ:
  • % of income used for eligibility calculations
  • % of rent used for eligibility calculations
  • Variable pay
  • Stress-test rate
  • Early Settlement Fees
  • Use of Credit Bureau
  • Providing loans for fees

Debt Burden Ratio (DBR) Rates

• Banks use different rates to calculate affordability
• Some use the offer or headline rate
• Others build in a margin of 2%
• This will effect the amount your client can borrow
• Central Bank Regulation states:
  • In arriving at DBR lenders must stress test the rate by 2-4% above current rate, depending at what level interest rates are in the cycle

Case Study 2 - Employed Calculating DBR & Affordability

• Guaranteed Monthly Income:
  • Basic salary
  • Fixed Allowances (paid)
  • Rental income (in UAE)
  • 2 applicants?