As well as registering properties, Land Registering and Cadastre” DawaerIkarieh” Offices can answer queries concerning the ownership of property. Anybody can make an inquiry about any piece of real estate and apply for a copy of ownership deed. All the Land Registration Office needs is the location of the property. The application costs LL 1,000 for processing and LL 9,000 for the copy of the deed. The deed details the exact location, number, and size of the plot, who is the registered owner, whether there are any disputes over ownership or pending legal cases. Computerization has made the application process much faster, encouraging many more people to apply directly. Ownership queries can also be applied for through LibanPost, which will render the service for LL 15,000.
The following are the most common enquiries that a prospective home buyer usually makes prior to purchasing a property.
The answer to each question is set out below in a simple and easy to understand format.
Information about the developer can be found through two main sources:
- The Urban Planning Department which holds copies of the construction permit and the blueprint of the building.
- The Order of Engineers has information regarding materials used in construction and the building’s specifications.
These two sources give the buyer an idea of the quality of the developer’s work. But information about the developer in the market would be more useful. Also useful would be the confidential information which a customer could get through his bank from the BDL’s credit information department (Centrale des Risques), and from companies that specialize in providing consumer and business credit information.
After agreeing to purchase a property, a buyer has two options concerning registration. The buyer and seller can both go to the notary public and sign a sales contract, which gives the buyer a period of ten days to officially register the property. The second option allows the buyer to go directly to the local office of the directorate and register the sale immediately, after presenting a series of documents and paying a fee. Registering a property can take up to ten days, and is usually carried out by an agent. The agent will charge a fee around $800.
The rental valuation is not an accurate indicationof what the registration fees will be after purchasing the property. Such valuation is provided by the Department of Built Properties at the Ministry of Finance (MoF) based on predetermined charts that fix rental value per area and region. Up until September 14, 2011, rental valuations were labeled not valid for registration estimation. The head of the Cadastral Register had the right to reassess the valuation and raise it if he considered the rental valuation or the declared amount of the sale to be too low. However a new decision by the MoF stipulates the following:
- The rental valuation issued by the Ministry of Finance should be labeled as “valid for registration evaluation.”
- The registration fee should be based on the sale amount, or on the value of the property calculated by multiplying its rental value by 12.5, whichever is higher.
However, this decision is not fully implemented in practice yet.
One can postpone registering a newly purchased property but as long as the property is not registered at the MoF , in the eyes of the law, the old landlord is the legal owner and can still sell it to a third party. However, one could perform a protective procedure known as “tasjilihtiyati” or provisional registration, by which a mark is placed on the property deed at the Cadastral Register upon payment of a stamp fee that is less than the full registration fee. This stamp fee will be deducted from the full registration fee when the official registration procedure is completed. But this temporary registration lasts only ten days (tolerated for up to one month) and should be renewed. Another drawback of postponing registration is that the registration fee increases year after year, as it is calculated based on the value of the property on the date of the registration, and not the date of the initial sale contract.
Banks do not finance the entire purchase price of a home. Some will finance up to 85 percent of the price, others only 50 percent. The homebuyer is required to provide the remaining portion of the price in the form of a down payment. This down payment varies from bank to bank. With respect to other types of loans, such as subsidized loans introduced by the Central Bank or loans in collaboration with the Public Corporation for Housing, banks may finance a percentage of the house’s value with a down payment to be paid to the bank or to the developer. In all cases, the loan is based on a professional valuation of the property, which may differ from the asking price. If the appraisal values an apartment at $130,000 and the purchase price is $ 150,000 (or the other way round), the loan amount is based on a percentage of the lower of the two figures. Even agreement on valuation may not solve all problems. If the developer requires 30 percent and the maximum bank loan is 60 percent. The remaining 10 percent must be found elsewhere to complete the deal.
Banks consider the income of the household: husband, wife, and possibly children (if they want to be included). Concerning possible family problems, as long as the installments are paid on time the divorce on its own does not concern the bank. However, when one of the parents does not want to remain liable for the loan and wants to sell his/her share of the property (1,200 shares or half) to the other then the spouse buying those shares becomes solely responsible for making the monthly payments. In this case the bank has to reevaluate the financial situation to assess whether that person is capable of shouldering responsibility for the loan alone. The contract is transferred to the name of the spouse if that person is found financially fit. Otherwise, the property could be offered for sale in public auction.
The PCH subsidized loans benefit from the following:
- Lower interest rates. Current average interest rates are: 4.67 to 5.07 percent through the PCH versus 5.14 to 5.44 percent through a BDL subsidized banking loan.
- Exemption from paying the six percent property registration fee and mortgage fees.
Housing loans have become the norm for prospective homeowners. These loans are among banks’ core products and competition is high. The market is full of interesting offers from banks. To qualify for a loan, homebuyers first need to fulfill a certain number of requirements. For many people, a housing loan is the most important financial commitment they will ever make, so they should understand the loan amount, fees, and conditions involved before making any decision. On the personal level, the borrower needs a steady job and a salary that justifies this amount of the loan. Loan applicants need to provide a copy of their ID, a detailed salary statement, proof of the length of employment, the type of work, and a declaration of all financial commitments. In addition, salary and job details need to be confirmed by the employer on company stationery. Some banks will include a proportion of the spouse’s earnings to determine whether the household income is high enough to justify a loan. The lenders will almost certainly require domiciliation of the borrower’s salary. Some lenders may even require a guarantor.
Iskan Loans: These loans are granted by banks in collaboration with the Public Corporation for Housing. Usually Lebanese citizens or residents with a monthly income ranging from LL 600,000 to LL 6,750,000 are eligible. The purchased property must be located at least 25 Kms far from another property the beneficiary owns. In addition the size of the purchased property must not exceed 200 square meters. The maximum amount is LBP 270 million reimbursed over 30 years.
BDL Subsidized Loans: These loans are granted by banks with lower interest rates thanks to the support of Lebanese Central Bank. These loans usually cover-up to 65%of the property value for Lebanese residents and 60% for expatriates with an unlimited loan amount. They are granted only in Lebanese Pounds and are reimbursed over 15 years with 2 years as a grace period.
Bank Housing Loans: These are the different housing loan packages offered by each bank. The criteria and conditions of such loans are very different from one bank to another. Some create special housing loans for different categories of people such as expatriates, doctors, military, etc.
Under Construction Loans: These loans are available for a borrower planning to buy an apartment under construction from developers preapproved by banks.
Some Lebanese banks have capitalized on the trend in the kind of property buyers are looking for. Homebuyers are increasingly opting for cheaper apartments in the suburbs. Aware of the importance of this niche segment, SERAY CONSTRUCTION has entered into a partnership agreement with CreditBank with a view to helping a buyer, a Lebanese residing in Lebanon or a Lebanese expatriate, obtain an Under Construction loan while the project is at the stage of being constructed. More than the client CreditBank considers the developer, SERAY CONSTRUCTION, to be its guarantee in its decision to extend loans to buyers.
The client can get the pre-approval within 72 hours from the application date.
The following are some of the advantages of “CreditBank Underconstruction” loan:
- Loan ceiling up to 800.000.000 LBP
- BDL-subsidized loan
- Maximum loan amount is up to 75% of residence price.
- Grace period of 6 months.
- Down payment 25%.
- Loan must be in LBP.
- Loan maximum duration is 30 years.
- Interest rate on loan: 5.44% (1st year: 4.94%)
Nationality: the applicant must have held the Lebanese citizenship for at least ten years.
Age: the applicant must be at least 21 years old and should be able to pay off at least 75 percent of the total loan amount before he reaches retirement age (64 years old).
Income: the income must not exceed ten times the minimum wage. Today the minimum wage is LL 675,000 so the total monthly household income must not exceed LL 6.75 million. The household income is considered to be the income of the wife and husband combined. It is possible to include the salaries of children of working age. However, this would deny them the possibility of applying for a PCH housing loan when buying a home themselves. Eligible persons may benefit only once from its subsidized loans.
Size of unit: the maximum surface area of a residential unit excluding common areas, terraces, and balconies is determined by the PCH based on household income as per the following table:
|Monthly household income||Maximum surface area allowed|
|Less than LL3 million||Up to 150 m2|
|More than LL3 million||Up to 210 m2|
The house purchased by the applicant must not be the property of a direct relative (parent or sibling). The loan applicant, the spouse, and children (if included in the household income estimation) should not own any other residential unit within a 25 kilometer radius of their place of employment. The residential unit to be purchased must constitute the applicants’ primary residence and may not be let out, mortgaged, or used as collateral for any other financial commitments. The maximum loan amount is $ 180,000.
Nationality: The applicant must have held the Lebanese citizenship for at least ten years.
Income: The applicant must have a minimum salary of LL2 million.
Age: The applicant should repay the entire loan amount before reaching retirement age (64 years old).
- Loans through the Banque de l’Habitat have the following advantages:
- A higher loan ceiling up to LL600 million ($400,000).
- No maximum ceiling on household income.
- No restriction on the square area of the property to be purchased.
- An applicant can benefit from the bank’s housing loan twice in a lifetime provided the old loan has been settled.
- Households with a monthly income under LL5 million are exempt from registration fees.
For bank loans, the income is defined as the household income after other loan installments are deducted based on the BDL’s credit information department (Centrale des Risques). Other household fixed expenses are generally not deducted from the income when calculating the loan ceiling and the monthly installments’ amount.
Loan reimbursement periods may stretch over 30 years. Most banks do not extend the term of the loan beyond the age of 65 for the applicant. It is as much in the bank’s interest as it is in the homebuyer’s to agree on a package that he (the buyer) can afford. The amount borrowed is usually fixed so that the monthly payments, with their interest, do not constitute more than one-third of the borrower’s salary. Paying lump sums off the loan may not save much money. Repaying a few notes may save nothing at all. What constitutes a few notes is a matter for negotiation between borrower and lender. Even if the whole balance is repaid early, banks deduct from the settlement figure an amount equivalent to only one percent to five percent of the interest. Interest constitutes by far the largest portion of the cost of a home loan. The rates fluctuate according to the yield of Treasury Bills, LIBOR (London inter -Bank Offered Rate), or the US Prime Rate, with an added fixed percentage. Other types of rates may be utilized by banks, such as the Beirut Reference Rate and the Cost of Banks’ Fund. With both marker rates very low, the figures quoted in Lebanon are usually stated not only as a certain percentage above one or the other but also as a minimum. Rates are usually reviewed yearly (in the case with the new loans subsidized by the Central Bank or loans that are based on LOBOR) or every two years (in the case of loans taken out with the Public Corporation for Housing or in the Housing Bank, which are based on lira-denominated one/two/three-year Treasury bills). Homeowners should therefore ask about the current rates of LIBOR or the local T-bill in order to know what their running interest rate is both at the time of application and subsequently on the outstanding balance. Some banks propose a promotional interest rate for a specified number of months at the beginning of the reimbursement period when buyers’ expenses are high. Homeowners should keep in mind that even though international rates might be decreasing to unprecedented low levels, the minimum rates in the local market have currently fell to an all-time low of nearly four-five percent.
Usually when one tries to settle parts of the loan early (before the loan’s full maturity), a penalty is imposed on the debtor varying from one to two percent of the total outstanding loan amount. If the borrower calculates that the amount of interest he would save in monthly installments is greater than the penalty he will have to pay, then settling the loan or parts of it early could be beneficial.
The interest rate charged by banks for housing loans is not a fixed rate by definition as it is pegged to different indices and varies with the fluctuation of these indices. But banks usually commit to a fixed rate of interest for a maximum of three years. After that period the interest charged varies with the index it is pegged to.
For subsidized housing loans, the formula is set by the BDL and depends on the type of housing loan issued:
- For PCH subsidized loans, the interest rate charged is generally equal to 20 percent of the yield of two-year T-Bills plus 3 to 3.9%.
- For BDL subsidized loans, the interest rate charged is generally equal to 40 percent of the yield of one-year T-Bills plus 2.5 to 3.3%.
For non- subsidized housing loans the interest rate formula is set by the bank and is usually a function of either LIBOR or Beirut Reference Rate (BRR), a composite index issued by the Association of Banks in Lebanon (ABL) each month, and differs from one bank to another.
Yes it is possible. However there are two options:
APCH subsidized loan can be issued in the name of offspring of working age who generate income provided their salaries meet the requirements set by the PCH, as the beneficiary of the loan is the debtor. This is done to comply with the PCH requirement that a loan beneficiary has to be able to settle at least 75 percent of the loan amount before he reaches his retirement age of 64.
Non subsidized bank loans, where the parent can act as a ‘‘personal guarantor’’ for the loan while the son or daughter is the real borrower, assuming that the parent is financially eligible.
For loans that are subsidized by the Central Bank (BDL) also known as “QuardMadoum” or Public Corporation for Housing (PCH) also known as Iskan, the apartment purchased cannot be let out before the end of the loan repayment period. The rationale behind this is that for both BDL and PCH housing loans, the property should constitute a primary residence, based on the fact that the buyer benefits from reduced interest rates on the loan. For PCH subsidized loans, the buyer benefits from exemptions on registration and mortgage fees. The homebuyer is also expected not to sell the property before seven years from the issuance of the loan. Otherwise, the homebuyer has to pay a penalty amounting to two percent of the outstanding loan amount. For loans that are not subsidized, i.e when a loan is given by the bank from its own funds, selling the property before the end of the repayment period is subject to the bank’s approval and is negotiated on a case-by-case basis. However, in such cases the home buyer still has to pay a penalty to the bank.
The property owner can use the common sections of a building according to their needs provided this does not impede other owners from using these sections. A property owner may not make any changes to common areas at all even in the case of renovation. In the non-common areas of an apartment a property owner is not allowed to make any changes that would affect the homogeneity of the building, such as modifications to the building’s entrance, windows, balconies, or terraces unless at least 75 percent of the building committee members agree on these changes. However, five years ago the Ministry of Interior and Municipalities issued a decision amending the above stipulation to make allowances for the “tough economic conditions of Lebanese families”. The ministry allowed home owners to expand the living space in their homes at minimum cost. The decision allowed them to close off terraces and balconies with glass/or aluminum partitions.