UAE banks fuel real estate demand surge with lower mortgage rates, extended financing facilities

Arabian Business

06-05-2025

Banks in the UAE are emerging as the new drivers of demand surge in the property market in the country, luring international and domestic investors with mortgage rates below the UAE Central Bank denominated rates, despite fading expectations of cuts in interest rates any time soon, market players said.
Some of the banks are now offering mortgages at below 4 per cent as against the three-month Emirates Interbank Offered Rate (EIBOR) of 4.2 – 4.3 per cent, they said.
This, along with the strengthening of currencies like the British pound and euro against the dirham in the wake of the weakening of the US dollar, is triggering a major demand spike for residential real estate, as properties in Dubai have effectively become more affordable for international buyers.
by removing the AED 1 million or 50 per cent upfront payment requirement for property-linked golden visas.
'The macroeconomic shifts underway globally triggered by rising tariff and tax rates, and a weakening US dollar in 2025, are driving increased interest in the UAE real estate market, particularly from foreign nationals,' Sawan Karia, Director, Broker Channel at Huspy, a Dubai-based leading player in the mortgage market, told Arabian Business.
'The currency advantage, coupled with economic uncertainty in other global markets, is leading to a notable increase in mortgage activity – not just from ultra-high-net-worth individuals, but also from salaried professionals and non-resident investors who are now choosing to finance property purchases in the UAE,' he said.
Karia said while Dubai has long appealed to non-resident buyers, that demand is accelerating now, fuelled by competitive lending rates, long-term residency options, and a high standard of living.
Senior executives at some of the city-based investment and real estate consultancies also confirmed the latest mortgage and currency-linked demand surge in the real estate sector.
UAE banks stepping up their mortgage play
Sector experts said the softening mortgage rate-led demand in the UAE real estate market is evident from the fast-narrowing gap between total market volume and mortgage activity.
Banks' willingness to step in with the final payments for off-plan properties bought under front-loaded developer payment plans is helping this, they said.
Sankey Prasad, CMD, Colliers Middle East and India, said that with mortgage volumes in Dubai alone surging 24 per cent year-on-year in Q1 2025 as per Property Monitor, banks are clearly stepping in as demand catalysts.
'This will further fuel and stabilise demand for residential units across major micro markets in Dubai,' Prasad told Arabian Business.
The Colliers Middle East and India chief executive said UAE banks are now playing a pivotal role in fuelling property market momentum by offering mortgage rates that undercut the central bank's benchmark rate.
'This is a strategic move to capture growing investor appetite amid a prolonged high-interest-rate cycle,' he said.
Citing that the British pound gained nearly 4 per cent and the euro over 3 per cent against the UAE dirham since the start of the year, Prasad said: 'This FX-driven affordability, combined with flexible local financing, is intensifying global demand for residential assets in prime districts.'
Karia said while the UAE's mortgage market accounted for $62 billion of the $240 billion in total real estate transactions last year, it's important to contextualise that figure.
'One emerging trend is the rise of front-loaded developer payment plans – structures like 70-30 or even 80-20, where the majority of payments are made during construction.
'In response, and in alignment with central bank regulations, several banks are now willing to step in and finance the final payment once buyers have paid at least 50 per cent of the property value,' he said.
Industry players said that while such bank financings were earlier limited to Tier 1 developers, they are now seeing this financing model gradually extending to a broader base.
As for rate cuts, they said at the beginning of the year, market expectations pointed to as many as five interest rate cuts.
'That outlook has since softened, with most now anticipating just two, or possibly three, cuts,' Karia said.
Given that the UAE dirham is pegged to the US dollar, any decision by the US Federal Reserve to lower rates has a direct influence on borrowing costs and the Emirates Interbank Offered Rate (EIBOR).
AI boosts mortgage efficiency
Market experts said along with the lower mortgage rates, the latest AI-led initiatives in the mortgage sector are also playing a pivotal role in attracting investors to access bank finances in Dubai.
Huspy was the first to be off the block in the region, announcing an AI-powered mortgage chatbot on WhatsApp late last month, significantly reducing the time taken to secure a home loan from weeks to just a day.
Sector players said that while deeper integrations with banking partners are still under development, the AI-driven initiative is already helping to significantly reduce the time taken to prepare mortgage applications, which typically runs to multiple pages.
Real-time checks by company brokers or experts identify missing pages or values outside expected ranges, significantly reducing back-and-forth communication.
'In a market where deals move quickly, there is often little time to unpack bank jargon before committing to a home purchase,' Mo Ghahroudi, VP – AI at Huspy, told Arabian Business.
'Huspy AI addresses this gap by offering real-time responses, based on the most up-to-date bank offers, around the clock,' he said.
Sector experts said borrower expectations are evolving quickly on the technology front, with customers increasingly wanting a digital-first experience – one where documents can be submitted online, approvals are faster, and communication is seamless.
While banks are working to modernise legacy systems, the industry now faces a pivotal moment – scale up human support to meet today's volume or invest in systems that can sustainably deliver efficiency tomorrow, they said, adding that in the meantime, platforms that bridge this gap are winning borrower trust by offering the speed and simplicity the market now demands.