Under Construction Home Loans with Variable Interest Rate

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Owing to the development of real estate in the UAE, one can find several options when planning to buy a home. At the same time, a considerable number of individuals seek to buy under-construction properties or even acquire land to initiate own construction there. Fortunately, both types of applicants can find a relevant home loan in UAE, with several under-construction home loans also being available for the same. 

Various banks offer under-construction home loans in UAE to customers looking for funds to construct a new home or get an under-construction property. Although they are similar to regular home loans in several aspects, some of their features demand closer scrutiny. With that in mind, let’s discuss all the key details related to under-construction home loans with reduced interest rates in the UAE.

Types of Interest Rates on Under-Construction Home Loans

In the UAE, you can opt for a fixed interest rate or reducing interest rate on under-construction property home loans.

1. Under-Construction Home Loans with Fixed Rates

In an under-construction home loan with a fixed rate, the interest rate remains fixed and is generally calculated on the total loan amount, although it might be applied only to the outstanding amount in some cases. Under-construction home loans with fixed rates are advantageous as the rate remains constant regardless of market fluctuations.  Consequently, your interest amount will not change whether the market falls or rises. 

2. Under-Construction Home Loan with Reducing Rates

Instead of charging interest on the total principal amount, under-construction home loans with reducing rate charge interest on the remaining loan balance. This means that your interest amount decreases as you pay instalments. A home loan of this type in the UAE can be beneficial if you can settle your loan early. 

Other than these two, some home loans may also come with variable interest rates. As the name implies, the interest rate here changes as per the market standards. However, most banks set fixed limits on the lower and upper sides with this type of interest rate.

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Top Under-Construction Property Home Loan Plans with Reducing and Variable Rates

Lets have a look at the top plans related to under-construction property home loans with reducing and variable rates in the UAE:

1. Ajman Bank

With this type of Ajman Bank home loan, a customer can avail of financial assistance to construct a house or villa and can even opt for self-construction or hiring a developer.

Features and Benefits of Ajman Bank Under-Construction Home Loans with Reducing Rate

  • Maximum amount of finance – AED 8 million
  • Maximum loan repayment tenure – 25 years (including the construction period)
  • Free life Takaful for the complete tenure of the home loan
  • Minimum down-payment required – 50% of the value of the property
  • Financing up to 50% of the value of the property
  • Reducing rate – starting from 3.59%
  • Transactions available for Ajman Bank under-construction home loan:
    • Finance to construct a new property (new purchase)
    • Transfer existing home loan to Ajman bank (standalone payout)
    • Purchase of a property in the secondary market, with Ajman Bank taking over the seller's mortgage from another bank or financial institution (seller buyout)
  • Finance available for freehold properties and non-freehold properties:
    • Freehold properties - It is a type of property that developers or sellers offer to buyers (UAE nationals as well as expatriates) with the right to own. The government approves specific locations for freehold properties. 
    • Non-freehold properties - Only UAE nationals and GCC nationals can purchase these properties (in certain areas) without the right to own them. Under-construction property home loans are available for properties with title deeds/mortgage deeds issued by the municipality. Ajman Bank accepts mortgage deeds issued in the customer's name that mention the bank as mortgagee.  
  • Approvals for these under-construction home loans take approximately 48-72 hours, subject to verification of documents submitted by the customer.
  • The list of the developers approved by the Ajman Bank: 
    • Real Estate Investment public Corporation – Flamingo Villas
    • Meydan Shobha
    • AI Zorah – Golf Villas
    • Manazel Real Estate
    • Aldar/Sourdough
    • Emaar Properties
    • Charlestates – Jasmine Residential Complex and so forth

Ajman Bank offers the following forms of Forward Ijarah construction finance: 

Istisna Purchase - As per this agreement, the customer is designated as the contractor for the construction of the property by the bank. The customer will be responsible for construction and receive progressive payments as the completion certificates are submitted. Following the completion of the property, the bank leases it to the customer for Ijarah payments. It must be kept in mind that the bank must approve all alterations to the approved construction plan here.

SPA - Here, the bank can sign the SPA (Sales & Purchase Agreement) directly with the developer if the customer has not made a down payment to date. After making the down payment to the developer,the customer will then need to make bank payments until the property is handed over.

Tripartite Agreement - Through a tripartite agreement, the customer surrenders their rights to the property after making a down payment (or any other payment related to the property) to the developer. In this case, the bank will record the developer as the new owner, and progressive payments (after a down payment is made by the customer) will be made directly to the developer.

Eligibility Criteria for Ajman Bank Under-Construction Property Home Loans with Reducing Rate in UAE, Dubai

Parameter

UAE Nationals

Ex-pats

Age Range

21 years - 70 years at the time of maturity of loan

21 years – 65 years at the time of maturity of loan

Salary Criteria

At least AED 25,000

At least AED 25,000

Documents Required for Under-Construction Home Loans with Reducing Rate with Ajman Bank

  1. Completed and signed application form
  2. Bank statements of the previous six months
  3. Salary certificate
  4. For self-employed individuals –  
    • Copy of trade licence
    • Audited financial statements
  5. Relevant property papers
  6. Any of the following 
    • Passport
    • Visa
    • UAE National ID
    • Khulasat al Khalid copy 

Fees and Charges of Ajman Bank Under-Construction Home Loans 

The general structure of fees followed for Ajman Bank home loans is as follows:

Pre-approval fees 

AED 3,000

Processing fees

Up to AED 5 million finance amount – 1% of the total loan amount

AED 5 million to AED 10 million – 0.80% of the total finance amount

More than AED 10 million – 0.70% of the total loan amount

Early settlement fees

1% of the outstanding balance or AED 10,000 (whichever is lower)

Cancellation of final or pre-approval by customer

No refund provided

Application denied by bank

No fee

Life Takaful

Free

Property Takaful

0.036% per annum

Liability letter

AED 85

Other letters

AED 90

Clearance letter

AED 95

Late payment fee

Up to AED 700

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2. HSBC

HSBC provides under-construction home loans of three types.

1. Self-Construction Finance Facility - Borrowers can utilise this facility to pay contractors for the construction of the property on land they already own.

2. Granted Land Construction Facility - This facility is provided by HSBC to borrowers for the purpose of establishing, constructing, and developing a residential property on land granted by the Ruler of the Emirate.

3. Last-Stage Payment Finance Facility - This type of facility in HSBC Home Loan is offered by the bank to help users with respect to the last stage payment to the developer in the construction of a residential property.

Features and Benefits of HSBC Under-Construction Home Loans 

Self-Construction Financing Facility - The interest here is calculated on the daily outstanding balance and the interest is payable along with the principal on a monthly basis.

  1. This facility can only be utilised to finance a part or all of the residential property construction or development costs on the owned land
  2. For granted land construction facilities, a drawdown may be made in more than one request, although each request must be at least 10% of the loan
  3. Details required for applying for the self-construction finance facility –
    • Full construction report by an approved valuation company (arranged and paid for by the user)
    • Full construction report verified by the Consultant (if applicable)
  4. After the completion and handover of the property by the Contractor, the borrower would be required to notify a representative of the bank to update the property's registration details –
    • Dubai Land Department (property located in Dubai)
    • DIFC RORP (property located in DIFC)
    • ADM (property located in Abu Dhabi) 
    • Sharjah Real Estate Registration Department (if the property is located in Sharjah) or any other authority specified by the HSBC 

Granted Land Construction Facility -This type of loan can be used for the purpose of financing part or entire property construction or development costs on the granted land. Keep in mind that the 

  1. Granted Land Construction facility is solely to be used for construction in residential areas
  2. Drawdown, made by the bank in multiple advances, will be at least 10% of the self-construction finance facility

Last Stage Payment Facility -

  1. The interest is calculated on the daily outstanding balance of home loan debt.
  2. After the completion and handover of the property by the Contractor, the borrower will notify a representative of the bank to update the property's registration details -
    • Dubai Land Department (property located in Dubai)
    • DIFC RORP (property located in DIFC)
    • ADM (property located in Abu Dhabi) 
    • Sharjah Real Estate Registration Department (if property located in Sharjah) or any other authority specified by the HSBC 

Details Required for HSBC Bank Under-Construction Home Loans with Variable Rate 

The general details required for the HSBC under-construction home loan are –

  • Name of the contractor (company constructing the property)
  • Name of the consultant (building consultant approved by the municipality)
  • Duration of construction of property 
  • Total cost of construction from time to time
  • Estimated value of the granted land plus the property at completion
  • Records of earlier loan (if any) secured by a first ranked mortgage over the property and evidence of relevant security for the earlier loan (in case the bank has accepted a second ranked mortgage as security) 
  • Original certificate from the consultant certifying that the construction has been completed and instruction to pay the contractor for each advance request,
  • Construction report if applying for the self construction facility (type of under construction home loan)

Documents Required for Under-Construction Home Loans by HSBC

Here is a list of general documents required to apply for HSBC under-construction home loans:

  1. Filled up and signed application form
  2. Bank statements of the previous six months
  3. Salary certificate
  4. Trade licence copy for self-employed individuals
  5. Audited financial statements for self-employed applicants
  6. Relevant property papers
  7. Valid passport, Emirates ID, Khulasat al Qaid copy, valid visa

Additional Documents for Last Stage Payment Facility

1. For non-DIFC properties

  • Original extract
  • Original title deed
  • Original mortgage certificate
  • Certificate of the interim (Oqood) or pre-title register (or equivalent registration in the relevant department in any other Emirate) 
  • Proof of registry of the property and a first ranking legal mortgage in favour of bank at the Dubai Land Department, Sharjah Real Estate Registration Department or ADM (or equivalent department in any other Emirate)

2. For DIFC properties

  • Original certificate from the RORP confirming borrower’s interest in the property

Fees and Charges of HSBC Under-Construction Home Loans 

Arrangement fees

Personal banking and advance customers

1.05% (inclusive of VAT) of the loan amount – maximum AED 5,250 (including VAT)

HSBC global private banking, Jade, and premier customers

0.5% (0.525% inclusive of VAT) of loan amount – up to AED 5,000 (AED 5,250 including VAT)

Closure fees

Early settlement charges

1 % (1.05% inclusive of VAT) of the outstanding loan amount or AED 10,000 (AED 10,500 inclusive of VAT), whichever is less

Late payment fee

 

NIL

Loan rescheduling fees

 

AED 1,000 (AED 1,050 inclusive of VAT)

Property swaps administration fee

 

AED 1320 (AED 1,386 inclusive of VAT)

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3. Abu Dhabi Islamic Bank

Abu Dhabi Islamic Bank, also referred to as the ADIB, provides under-construction property home loans to provide funds for construction and renovation purposes. The ADIB plan providing reducing rates for under-construction home loan is titled 'Finance against property.

Features and Benefits of ADIB Under-Construction Property Home Loan with Variable Interest

  1. Available for both UAE citizens as well as UAE resident expatriates
  2. Maximum finance amounts:
    • UAE Nationals –  AED 10 million
    • UAE Expatriates – AED 15 million
  3. Home loan up to 80% of the value of the property
  4. No early settlement fees
  5. Profit rates 3.99% (per annum) onwards 
  6. Optional grace period of six months for the borrower 
  7. Property Takaful insurance provided by the Abu Dhabi National Takaful Company (fees borne by the Abu Dhabi Islamic Bank for the entire term)
  8. Adherence to Shariah finance laws for under-construction home loans via two main components –  
    • Istsina – The borrower is responsible for the construction of the property
    • Ijarah –  While the borrower is responsible for construction, the bank (ADIB) is the lessor and takes the responsibility for the contract and handing it over to the borrower (lessee) when the construction is completed. 

Under this contract, the ADIB will initially own the property and later transfer it to the borrower at the end of the period. Keep in mind that a Real Property Sale Contract has to be signed by the ADIB (seller) and the borrower (purchaser).

  1. ADIB Gold Priority Banking status will be automatically upgraded once the borrower receives under-construction home loan under the plan 'Finance against property’ plan

Eligibility Criteria for ADIB Under-Construction Property Home Loan with Variable Interest Rates 

Who can apply?

Individuals (Salaried and Self-Employed)

Co-applicants - Two or more people applying for the loan where one applicant's assets and liabilities are assessed and the subsequent applicants are added to the title record

Co-finance relationship – Two or more applicants applying for the home loan where the combined assets, income, and liabilities are examined for eligibility

Permissible age range

Self-employed individuals: Minimum 30 years and maximum 70 years 

Salaried individuals: At least 21 years and maximum age of 70 years

Minimum salary criteria for salaried individuals

AED 10,000 if opting for salary transfer 

AED 15,000 if not selecting the salary transfer option

Annual turnover requirement for self-employed individuals

At least AED 3,000,000 (AED 3 million)

Geographical location of properties

For salaried individuals – all properties located across the UAE 

For self-employed individuals – properties in Dubai and Abu Dhabi

Documents Required to Apply for ADIB Under-Construction Property Home Loans with Variable Rates 

  1. Khulasat Al Kaid or the family book (only for UAE nationals)
  2. Salary certificate for salaried individuals 
  3. Company ownership documents for self-employed individuals
  4. Resident visa copy
  5. Emirates ID
  6. Valid passport
  7. Bank statements
  8. Liability letter (if applicable)
  9. Property documents

Fees and Charges for Under-Construction Home Loan by the ADIB 

Early settlement fees

1% of the outstanding total amount or AED 10,000 (whichever is lower)

Partial settlement fees

1% of the partial amount or AED 10,000 (whichever is lower) 

Issuance of other certificate

AED 75

No-objection certificate

AED 150

Clearance letter

AED 95

Request for copy of the original document

AED 100

‘Build Your Dream Home’ by Abu Dhabi Islamic Bank

This is another type of ADIB home loan that can be availed for pre-owned property or land for the motive of purchasing other property, construction, or renovation of a home. 

Features and Benefits of 'Build Your Dream Home’ Under-Construction Property Home Loan by Emirates Islamic Bank

  1. Maximum finance amount – AED 10 million (up to 85% of the value of the property)
  2. Profit rates starting as low as 4.75% per annum
  3. No early settlement fee applied at the time of selling the property
  4. Up to six months’ optional grace period 
  5. Property insurance paid for by the bank for the full tenure

The eligibility criteria, documents required, and the loan fees and charges for this are the same as mentioned above for the Emirates Islamic Bank 'Finance against property’.

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4.Emirates Islamic Bank

Emirates Islamic Bank offers 'Home Finance- Bina's' to address the requirements of individuals seeking to construct a home. Here, the bank leases the home to the borrower once it is complete. This product is based on Sharia laws and follows the 'Istisna' and 'Ijarah' structures.

Features and Benefits of Emirates Islamic Bank Under-Construction Property Home Loans

  • Loan repayment tenure of up to  25 years
  • Up to 85% of the value of the property financed by the bank 
  • Repayments on reducing interest rates as set by the EIB
  • Takaful coverage provided to ensure financial protection for the family of the borrower in the event of an unforeseen event resulting in death or injury – Life Takaful and property Takaful collected via the home finance instalment
  • Minimal documentation 
  • No additional charges for project monitoring and engineering services
  • First-rank and second-rank mortgages available for under-construction properties
    • First rank mortgages - Sharjah Housing Programme
    • Second rank mortgages - Mohammed Bin Rashid Establishment

Documents Required for Applying Under-Construction Home Loans with reducing rates by Emirates Islamic Bank

1. Bina'a Finance (Salaried UAE Nationals)

  • Valid passport copy 
  • Khulasat Al Qaid copy or UAE Emirates ID copy (originals have to be provided for verification)
  • Salary certificates less than 45 days old and must include information related to the length of employment, current designation, and salary 
  • Bank statements of the previous 6 months displaying salary credits
  • A liability letter from your current bank (less than 30 days old) 

2. Original documents containing property details like the following will also be required

  • Offer or quote letter from the seller
  • Agreement of sale and purchase
  • Title Deed/Mulkia and Site Plan
  • Copy of valid facility approval (for Sheikh Zayed Housing Program (SZHP) and Mohammad Bin Rashid Housing Establishment (MBRHE))

3.  Additional documents 

  1. Down payment proof (if made)
  2. Demarcation certificate
  3. Property specifications
  4. Cash flow statement
  5. Building permit
  6. Schedule of work
  7. Retention board undertaking
  8. Bank guarantee or performance bond
  9. Owner share completion (if required)
  10. Copies of the trade licence of the consultant or contractor
  11. Approved drawing
  12. Bill of quantity, signed by all parties

It must be noted that a contractor, if involved in the project, would be required to open an account with the Emirates Islamic Bank.

Fees and Charges for Under-Construction Home loans with Reducing Rates by the Emirates Islamic Bank

Pre-approval fees

  • For salaried individuals – AED 1,575 
  • For self-employed individuals – AED 2,625 

Full settlement – own funds

  • Residential and Commercial Property - 1.05% of the outstanding amount (Up to AED 10,500)
  • To be paid at the time of settlement

Full settlement – buyout

  • Residential & Commercial Property - 1.05% of the outstanding amount (Up to AED 10,500)
  • To be paid at the time of settlement

Dewan office settlement

NA

Sheikh Zayed Housing Programme

NA

Residential Property/Commercial property

1.05% of the amount being settled/paid (Maximum AED 10,500)

Cancellation of application before approval

AED 3,150

Cancellation of application after approval

No refund on pre-approval fees 

Application denied by the bank

None 

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How to Apply for Under Construction Home Loans with Variable and Reducing Rates?

One can easily apply for under-construction home loans with variable and reducing interest rates with Policybazaar UAE. Applying for such a home loan in UAE with policybazaar.ae is the best choice for users, as you can get the most suitable home loan plan for your planned construction at the most affordable rates with us. 

You can visit policybazaar.ae and head to the ‘Home Loans’ section under the ‘Banking Products’ category. After you fill out the lead form present on the page, you will be presented with the best home loan plans as per your requirements. You can explore these plans in a list, compare them as per their key features and costs, and get one of the plans as per your preference. 

Applying for a home loan in UAE is indeed a straightforward task with Policybazaar UAE. Our website has an easy-to-use online interface where you can extensively compare quotes from the most reputed banks in the country. With our discounts and offers, you can get these plans at the most reasonable prices. Moreover, you can easily contact us on facing any query or issue – our 24x7 customer service team and insurance experts are available to help you! 

Top Banks Providing Under-Construction Property Home Loans with Variable/Reducing Rates in UAE

Bank Name

Plan Name

Interest/Profit Rate (Variable and reducing) Starting from

Loan Tenure Up to

Ajman Bank 

Under-Construction Home Loans

3.59%

300 months (25 years)

HSBC Bank

Self Construction Facility

Granted Land Construction Facility

Last Stage Payment Facility

   

Abu Dhabi Islamic Bank

Finance Against Property

3.99% 

300 months (25 years)

Abu Dhabi Islamic Bank

Build Your Dream Home

4.75% 

25 years (300 months)

Emirates Islamic Bank

Bina’s finance

3.49%

25 years (300 months)

FAQ's

What is the age criterion to apply for under-construction home loans in UAE?

Most banks in the UAE require the applicant to be at least 21 years old to be considered eligible for their under-construction home loan plans.

Which banks provide the lowest under-construction property home loans variable interest rate?

Several banks offer low-interest under-construction home loans with high amounts in the UAE like Emirates Islamic Bank, Abu Dhabi Islamic Bank, HSBC, Ajman Bank, and so forth. You can visit policybazaar.ae to get the most affordable under-construction property home loans in the UAE.

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