New Decree Allows Mortgaging of ‘Granted Land’ in Dubai

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“The whole point of granting the land is not to make the ¬local rich but to develop the city.”

‘Granted land’ is defined as property owned by the Dubai government which is given to Emiratis either for residential, commercial or industrial purposes. The holder of this particular type of land cannot sell it but it can be inherited and converted to freehold after payment of a percentage of its value to the government.

According to Mohamad Khodr Al Dah, director of the Dubai Land Department’s (DLD) technical affairs division, for a long time, banks have been reluctant to lend to Emiratis using such land as mortgage collateral because of recoverabil¬ity and security of tenure issues. This is why a new decree was issued by UAE Vice President and Prime Minister and Dubai’s ruler Sheikh Mohammed bin Rashid Al Maktoum allowing the mortgaging of granted land in Dubai. This decree was summarized as follows by the director of DLD’s technical affairs division: “What it says is that we, the government, allow the banks to mortgage, we allow you to take a loan on it, we allow you to benefit financially from the plot…” Therefore, a beneficiary of granted land may mortgage the land to any bank or financial institution registered in Dubai. However, the main condition is that the money borrowed from the bank will have to be spent on the specific granted land which was mortgaged. The decree also states that Dubai’s Civil Court is responsible for settling any disputes arising from the mortgage.

The new ruling should spur further development across the Emirate of Dubai. According to Mr. Al Dah, “the whole point of granting the land is not to make the ¬local rich but to develop the city.”