Debt Financing
Debt financing is the use of borrowed capital to fund property acquisition or development, creating leverage to amplify returns while introducing interest costs and repayment obligations that must be serviced from income or capital reserves.
| Financing Benefits | Advantage |
| Leverage amplification | Control assets exceeding capital |
| Tax efficiency | Interest may be deductible (jurisdiction-dependent) |
| Liquidity preservation | Maintain liquid reserves |
| Return enhancement | Positive leverage when return exceeds cost |
| Leverage Impact Example | All-Cash vs Financed |
| Property value | AED 2M |
| All-cash return 8% | AED 160,000 on AED 2M (8%) |
| 75% LTV at 5% | AED 60,000 on AED 500,000 (12%) |
| Leverage benefit | 50% higher return on equity |
| Risk Factors | Exposure |
| Interest rate changes | Variable rate volatility |
| Income disruption | Payment obligations continue |
| Market decline | Negative equity possible |
| Refinancing risk | Terms may worsen at renewal |
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