# Avoiding Pitfalls? - Why not take maximum loan in UAE at low interest rates and inves



## rahzaa (May 2, 2012)

So, can you guys think of any potential pitfalls if i borrow 1 million AED at fixed rate of 2.7% and invest in real estate in emerging markets were returns have been 20%+ annually. The real estate market returns I am talking about have been this high for atleast 5 years now. The currency has been stable. 

Am i missing anything? Why don't more people do this?


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## Stevesolar (Dec 21, 2012)

Probably because personal debt in Dubai is a criminal offence if you can't pay it back!


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## TausifMohammed (Nov 16, 2015)

Rahzaa,

Which emerging markets are you talking about & what is your source for the 20% returns? Are you looking to invest in real estate (physical holding) or invest in real estate funds?

Other pointers to consider
1) How long do you plan to hold the investment ? You will be investing in the local currency, so what happens if the local markets currency weakens?
2) Ease of liquidating the investment. Selling Real estate funds on the stock markets is lot more easier than selling physical property.
3) How soon do you intend to pay the loan installment? Why fixed & not reducing balance interest? 
4) Buying a physical holding in emerging markets, you will need to do a lot of due diligence. Visiting that country multiple times to ensure you don't get a lemon. I've seen too many adverts which show awesome brochures whereas the actual location is nothing but a barren piece of land! 

I am unable to post a link since its my first post. But do a search on cushmanweikfield's emerging markets report to get an outlook for 2016+ few years ahead.

HTH,
Tausif


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## Mr Rossi (May 16, 2009)

rahzaa said:


> Am i missing anything? Why don't more people do this?


Because the key question to any investment should be "How does will this affect me in the worst case possible scenario?"

20% year on year, sounds unlikely at first glance too.


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## Stevesolar (Dec 21, 2012)

Baldrick - "I have a cunning plan!"


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## Mr Rossi (May 16, 2009)

Tausif talks sense. It's also worth noting that shortsighted borrowing to buy investment property, was probably the number one reason for all they abandoned cars last time around. Granted, some were flipping property off plan and funding it with credit cards but pessimism should be the bedrock for any financial endeavour.


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## The Rascal (Aug 6, 2014)

Stevesolar said:


> Probably because personal debt in Dubai is a criminal offence if you can't pay it back!


But if you don't like it you can always leave.

I thought that personal (not a mortgae/secured loan) was limited to AED250,000 for expats? Maybe that's changed.


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## Fat Bhoy Tim (Feb 28, 2013)

Emerging market property giving 20% returns sounds like cowboys throwing up shoddy crap. A bit like ...


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## Felixtoo2 (Jan 16, 2009)

I think the limit dependant on salary is 500K but i'm curious where you believe that you can get a fixed rate of 2.7%?


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## rsinner (Feb 3, 2009)

Felixtoo2 said:


> I think the limit dependant on salary is 500K but i'm curious where you believe that you can get a fixed rate of 2.7%?


Ahh yes - that came to my mind too. 2 years back I had taken a personal loan, which if I recall correctly was close to 7% (on a reducing balance basis - I hope the OP understands that). 

There are no emerging markets with 20% guaranteed returns AND the currency being stable.


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## Durise (Mar 1, 2016)

People don't take such loan because of risk. If you unable to pay the loan back you'll become an criminal in the eye of Dubai law.


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