What is Préstamo de Construcción?
Financiamiento a corto plazo para construir o renovar una propiedad, desembolsado en etapas según el avance de obra y convertido a financiamiento permanente al terminar.
Description
A construction loan is short-term financing used to fund the building or major renovation of a property. Unlike standard mortgages, construction loans are disbursed in stages (draws) tied to verified construction milestones. Upon completion, the loan is either repaid or converted to a permanent mortgage (construction-to-permanent loan).
Short-term: typically 12-36 months
Interest-only during construction (borrower pays interest only on drawn amounts)
Milestone-based disbursement verified by bank inspectors
Higher interest rates than permanent mortgages (reflecting construction risk)
UAE banks offer construction loans primarily to developers and corporate entities. Individual construction loans for villa building are available but less common. RERA requires developer construction financing to be structured through escrow accounts, ensuring buyer payments fund actual construction. Interest rates are typically EIBOR plus 3 to 5 percent for construction facilities.
How to interpret
Construction loans require active financial management during the build period. Interest-only payments accrue on drawn amounts, but the total interest cost escalates as more is drawn. Budget the full interest carry cost for the expected construction period, not just the nominal rate on the full facility amount.
The conversion from construction loan to permanent financing is a critical risk point. If market conditions or your personal financial situation change during construction, the permanent financing you planned may not be available at the terms you modeled. Always have a fallback plan for the permanent financing stage.
Contexto del mercado de Dubái
UAE banks offer construction loans at typical rates of EIBOR plus 3 to 5 percent, reflecting the higher risk of construction-phase financing compared to completed properties. Milestone-based disbursement, verified by bank-appointed inspectors, protects the lender and ensures funds are spent on actual construction progress.
For individual investors building a villa on a plot they own in Dubai, construction financing is available from some UAE banks at 50 to 65 percent LTV. The application process requires approved architectural plans, a selected contractor, and Dubai Municipality building permits. Pre-agreed milestones linked to draw schedules provide structure to both the financing and the construction management.
Frequently asked questions
Short-term financing for building or renovating a property, disbursed in stages tied to construction milestones and typically converted to permanent financing upon completion.
A construction loan is short-term financing used to fund the building or major renovation of a property. Unlike standard mortgages, construction loans are disbursed in stages (draws) tied to verified construction milestones.
Construction loans require active financial management during the build period. Interest-only payments accrue on drawn amounts, but the total interest cost escalates as more is drawn.
UAE banks offer construction loans at typical rates of EIBOR plus 3 to 5 percent, reflecting the higher risk of construction-phase financing compared to completed properties. Milestone-based disbursement, verified by bank-appointed inspectors, protects the lender and ensures funds are spent on actual construction progress.
Oliva feeds Construction Loan into a proprietary 6-dimension score that rates eparticularly Dubai project on Financial Value, Market Dynamics, Location, Developer Trust, Risk, Macro Context, and Liquidity. This keeps comparisons consistent across hundreds of listings.
RERA requires developer construction financing to be structured through escrow accounts, ensuring buyer payments fund actual construction. Interest rates are typically EIBOR plus 3 to 5 percent for construction facilities.
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This content is for educational purposes only and does not constitute investment, financial, legal, or tax advice. Yields, returns, and market data referenced are historical or estimated and are not guaranteed. Capital is at risk. Seek independent professional advice before making investment decisions. Oliva is a licensed Dubai real estate advisor (DLD Broker Card: 92025, RERA BRN: 1573501). Read our Key Risks Disclosure and Disclaimer.