Growing Demand for Mortgage Financing in the UAE
Is mortgage financing the new norm in the UAE real estate market? In 2025, the answer is yes.
Mortgage-backed purchases are growing steadily, replacing Dubai’s historically cash-dominated real estate environment. According to experts, this is driven by growing demand from residents seeking long-term ownership, government reforms and investor-friendly financing structures.
Traditionally, the UAE property market – especially in Dubai – has been cash-driven, favored by high-net-worth individuals who value speed and flexibility. But that’s changing. Mortgage transactions surged by 27% in Q1 2025. Along with this, Banks are offering rates below 4% and post-handover plans to make homeownership more accessible.
Key Factors Driving the Positive Outlook
Several factors are converging to drive mortgage demand and shape UAE real estate.
Growing Expat Population
As the UAE attracts more expats, especially professionals and families, long-term living has become the norm. These groups are seeking stability through ownership rather than renting. A maturing expat lifecycle – now often exceeding 5 years – is encouraging more people to buy.
Long Term Visas and Ownership Reforms
The introduction of 10-year Golden Visas and eased foreign ownership laws has boosted investor confidence. Moreover, UAE property laws also strengthen the market. So anyone can secure long-term assets and contribute to economic diversification.
Competitive Mortgage Rates
Mortgage rates have become more attractive in recent years, with some as low as 3.99% to 4.24%. Tied to the US dollar via currency peg, UAE mortgage rates are indirectly influenced by the US Federal Reserve. Rate cuts in 2025 could make financing even more affordable.
Innovative Financing Structures
Developers and banks are making ownership easier with 70-30 and 80-20 payment plans and extended post-handover options. Along with flexible payment plans, Banks are also now financing off-plan properties. These flexible arrangements allow buyers to spread payments and reduce upfront capital requirements
Trends in UAE Real Estate Financing
The Dubai property market is undergoing a structural shift as consumer behavior and lending technology evolve.
Digital Mortgage Platforms
Fintech platforms like Holo are changing the mortgage process by offering rate comparisons, digital applications and seamless approvals. These solutions reduce paperwork and speed up transactions, especially helpful for younger tech-savvy buyers.
From Speculative to End User Market
The market sentiment has shifted. Historically, investors dominated the Dubai Real estate growth. But now, more end users – families, mid-income residents and professionals – are entering the market. They’re focused on long-term residence rather than short-term gains. This reduces volatility and promotes sustainable growth.
Affordable and Green Housing
Developers are responding to buyer demand for affordability and sustainability. Projects now focus on smaller units, energy-efficient systems and integrated communities – in line with global ESG trends.
Mortgage Penetration Up
Q1 2025 saw 10,949 mortgage transactions worth Dh41 billion, up from Dh33 billion the previous year. Mortgage deals now account for a bigger share of total real estate activity. Banks are also responding to this demand by increasing their lending. A 27% year-on-year jump in mortgage issuance in Q1 2025 shows strong institutional confidence in the sector.
Cash Buying Vs Mortgage Financing
Engineer Amer Khansaheb, CEO and Board Member at Union Properties, said Dubai used to be a cash-heavy market, especially in the luxury segment. But that’s changing.
“We are seeing a good balance between cash and mortgage-financed purchases,” he said. “This reflects changing buyer profiles. Family buyers and long-term residents now prefer sustainable homeownership through bank financing.”
Banks have helped accelerate this trend by offering competitive rates, post-handover payment options and buyer-friendly repayment terms. According to Khansaheb, this is a sign of market maturity and long-term stability.
Mortgage Financing Growing: Holo’s View
Arran Summerhill, COO of Holo, said digital lending and structural reforms are driving the growth. “Cash still leads, but mortgage financing is gaining ground,” he noted.
In January 2025, Dubai property prices dropped 0.57% to Dh1,484 per square foot, but transaction volume surged. That month alone saw 14,413 deals signed and mortgage loans rose 6.8% month-on-month to 4,134.
UAE-wide Q1 data showed Dh239 billion in real estate transactions, including Dh41 billion through mortgages. This increasing penetration is creating competition among lenders and pushing rates down.
Protecting Stakeholders
Summerhill stressed governance,“The Central Bank is enforcing high standards for banks and finance houses. RERA is governing broker behaviour. But consumers should be careful about how their data is being handled and where it’s being sent.”
For properties under Dh5 million, expats need 20% deposit, Emiratis 15%. For higher value properties, the deposit increases. While this protects banks, some buyers are struggling to meet the rising upfront costs.
He said we need reform, especially in loan-to-value caps to match today’s property prices. “We need lending structures that reflect today’s pricing,” he added.
Summerhill thinks long-term mortgage solutions are getting more feasible for expats.
“Lenders are offering 5-year fixed rates below 4.24% and portfolios grew 27% in Q1 2025. Many expats want to stop renting and start building equity. It’s a lifestyle change and a smart move.”
He said for many, homeownership means financial stability and an investment in long-term residency in the UAE.
Challenges and Opportunities for Investors
Despite the good news, there are still hurdles.
High Down Payments Still a Barrier
Expats must put down at least 20% for properties under Dh5 million, compared to 15% for UAE nationals. Properties over Dh5 million require even bigger down payments, making it tough for many buyers.
Construction Costs and Global Volatility
Material and labour costs are increasing, pushing up property prices. This could reduce affordability and slow down new projects. Global economic fluctuations could also impact lending and buyer sentiment.
No Change in Mortgage Cap Limits
Although property prices have risen 124% since 2020, the loan-to-value caps haven’t been revised. This gap could limit financing for mid-income families trying to keep up with rising property prices.
Conclusion
The future of UAE real estate financing looks extremely promising. All indicators point toward continued steady growth. The focus shifts toward affordable housing and sustainable developments.
Some challenges like rising construction costs remain present. Global market volatility could impact financing conditions later. Despite these factors, buyer sentiment remains largely positive. The mortgage market continues to mature and stabilize.
The mortgage financing in UAE market will attract more investors. Both local and foreign buyers will find opportunities. The market evolution reflects a more sustainable approach. Long-term investment will define the next phase of growth.
