Dubai has launched an initiative aimed at assisting first-time homebuyers, but early insights reveal that the benefits may be limited compared to existing mortgage options in the market. While the program has generated impressive statistics, many potential buyers are left questioning whether it truly enhances affordability.

Understanding the Scheme

Introduced in July of last year, Dubai’s first-time homebuyer scheme was designed to alleviate some of the financial burdens associated with purchasing a home. The initiative offers a reduced down payment of 15% instead of the usual 20%, along with upfront fees payable through credit cards and early access to premium properties from a roster of 20 local developers. Although it initially sounded promising, a review by AGBI indicates that many participating banks are providing mortgage terms that closely match their standard offers, with only marginal variations.

AGBI’s analysis of the five banks involved presents a stark reality. Four of these institutions offer no additional discounts apart from what they provide to all customers, while one bank extends just a 0.25 percentage point reduction on variable rates for scheme participants. This lack of meaningful incentives raises questions about the scheme’s effectiveness in making homeownership more accessible to first-time buyers.

Impact and Participation

Despite the somewhat disappointing incentives, the scheme has reportedly assisted over 2,000 residents in securing their first homes, leading to more than AED 3.25 billion (around $885 million) in residential sales, according to the Dubai Land Department. With over 41,000 residents registering for the program, nearly half of the transactions have been made by individuals who have resided in Dubai for over five years without owning property.

However, it’s crucial to highlight that various transaction-related costs—including brokerage commissions and mortgage registration fees—are excluded from the initiative, meaning buyers must still pay these expenses out of pocket. Additionally, the interest rates connected to the scheme closely resonate with the standard offerings in the market, with major banks like Emirates NBD and DIB listing rates starting at 3.99%, consistent with their standard fixed rates.

Alternatives for Homebuyers

In light of the limited incentives within the first-time homebuyer scheme, several alternative options for potential buyers have emerged. Notably, Baitek, a property technology startup founded in November, aims to simplify the home-buying process. By pooling buyers together, Baitek enables its clients to secure bulk discounts directly from developers, which may prove to be more advantageous than those presented by the scheme.

Co-founder Labib Shammas articulated his concerns regarding the scheme’s attractiveness, noting that discounts typically offered by developers are more compelling. Baitek aims to cut costs even further, offering discounts that exceed what developers typically advertise. CEO Ahmed Kamleh pointed out the rising costs in the market and emphasized Baitek’s mission to help make homes more affordable for residents.

Challenges for the Self-Employed

While the scheme has opened opportunities for many, it notably excludes self-employed individuals, who represent approximately 5% of the UAE population. Numerous accounts highlight the difficulties faced by self-employed workers in securing financing. Vladan Pantelić, CEO of a data analytics firm, expressed his frustration after being denied mortgage options due to his employment status, despite having a substantial history in Dubai. Similarly, a marketing agency owner shared that they were left with no viable options other than to purchase in cash.

The challenges of navigating the real estate market in Dubai are compounded by rising rental defaults, which have surged significantly in recent years, especially among white-collar workers affected by layoffs and job transitions. For many, managing both rent and off-plan sales proves to be an overwhelming burden.

In summary, while the first-time homebuyer scheme in Dubai has made strides in terms of participation and investment, it may not significantly enhance affordability or access to financing for all potential buyers. Alternative solutions, particularly for those self-employed, and rising market pressures further complicate the landscape for aspiring homeowners.