Lenders bet AED45,000 price gap fuels off-plan financing boom in Dubai

AED45,000. That premium, the average gap between off-plan and ready home prices in Dubai during the first half of the year, sits at the center of a new financing push that banks and developers are betting will reshape how buyers fund under-construction properties. According to Dubai Land Department data collated by DXB Interact, off-plan units also carry per-square-foot costs running 24 percent above comparable ready properties, even as they tend to be smaller. It is against this pricing backdrop that financial institutions across the UAE have begun extending mortgages covering up to 75 percent of off-plan property costs.

The banking partnerships, struck with major developers including Emaar, Modon, Dubai Holding and Sobha, stretch payment timelines well beyond what traditional lending allowed. Previously, lenders restricted mortgages on under-construction homes to projects already half-completed. The shift is real. Whether it moves markets is another question entirely.

Industry analysts expect the new financing structures will struggle to generate meaningful demand, and the reason is straightforward: developer payment plans already offer more attractive economics. These structures typically require an initial deposit of 10 to 20 percent to secure a unit, followed by installments representing 50 to 75 percent of the cost during construction, with the remainder due at handover. Projects typically span three to four years. Critically, staged payments carry no interest charges, a structural advantage that mortgages, with their borrowing costs spread across extended terms, cannot easily match.

“We do get the enquiries, but we’re not expecting a major uplift in off-plan, and the reason is that a lot of developers have attractive payment plans,” said Sam Amidi, sales director at Mortgage Finder, in remarks to Dubai Eye radio. “Those plans probably make more sense than taking a mortgage at this stage.”

The timing of these banking partnerships follows disruptions to the off-plan sector triggered by regional geopolitical events. Even before those disruptions, off-plan mortgages were a marginal financing channel. Just 1.5 percent of mortgages in Dubai were used for under-construction homes, according to Mortgage Finder.

A second structural headwind confronts the new schemes. Off-plan buyers have historically operated with a short-term investment horizon, seeking to acquire properties, realize rapid appreciation, and exit before construction completion. Extending payment obligations from a few years to 25-year mortgage terms offers no value proposition to investors pursuing quick returns.

“There was often a very short-term mindset in Dubai,” noted Harry Martin, head of off-plan at Dubai estate agency Betterhomes, describing the pre-war period. “People would want to come in, make some money and then leave. The market allowed them to do that. People could buy off-plan and double their money very quickly.”

By contrast, the broader mortgage market is shifting toward long-term holders. Refinancing accounted for approximately 70 percent of all valuation activity in Dubai by the end of the second quarter, up from a historical baseline of around 30 percent, according to real estate services company Savills. The surge reflects existing homeowners restructuring debt rather than selling, a pattern consistent with an increasingly end-user focused market where borrowers intend to hold assets over time.

Lenders have framed the new schemes as affordability measures. Mohamed Abdelbary, group CEO of Abu Dhabi Islamic Bank, stated the institution aims to “make homeownership more accessible” through its new mortgage offerings. Whether that cost-reduction argument resonates with the off-plan buyer base remains uncertain. The structural incentives pulling that segment toward faster transaction cycles and developer financing, rather than long-term debt obligations, remain firmly in place.

The open question for lenders is whether a new class of buyer, less speculative, more focused on ownership than appreciation, will emerge in sufficient numbers to justify the product. The off-plan mortgage market has the infrastructure. It is still waiting for its customer.