Mr. Ali buys a beautiful Villa (Type 4M) in The Springs for AED 1,700,000. He is able to secure financing with HSBC at 80% LTV over a 20 year repayment period.

Henceforth the loan/mortgage amount is 80% of 1,700,000 that is 1,360,000.

Original Investment:
He makes a down payment of AED 340,000 to make up the difference. A typical repayment mortgage interest rate for the Dubai market is 8.5% annually.

Financing Cost:
The monthly mortgage repayment is:

Interest only Mortgage
 1,360,000 (loan/mortgage amount) * 0.085 (Interest rate) = AED 115,600 / 12 (months)
= AED 9,633 per month.

Repayment Mortgage
Including the repayment portion of the loan = AED 143,712 / 12 (months) = AED 11,976 per month

Rental Income:
Typical rental income for a villa in the Springs (Type 4M) is AED 130,000 annually which is a rental yield of around 7.6%. A benefit to rent property in Dubai is that rents are paid annually and in advance.

Net income from rent is:
Interest only Mortgage:
130,000 (Rental income) – 115,600 (Mortgage payment) =AED 14,400
Mr. Ali receives a net income of AED 14,400 annually.

Repayment Mortgage:
130,000 (Rental income) – 143,712 (Mortgage payment) = AED -13,712
Mr. Ali pays a difference of AED 13,712 if he opted for the re-payment mortgage.

Looking at property selling prices over 2005 and 2006, property has appreciated 20% on average annually in Dubai.
 
Capital Appreciation:
 Increase of 20% annually: 1,700,000 * 0.2 = 340,000

Return on Investment:
Mr. Ali had a fruitful return of 104% on his initial investment of AED 340,000 in just 2 years.  Interest only Mortgage: 14,400 (Rental return) + 340,000 (Capital appreciation)
= AED 354,400

Return on Investment: 354,400 / 340,000 (Down payment) = 104%
 
Mr. Ali still had a beneficial return of 96% on his initial investment of AED 340,000 if opted for the re-payment mortgage.

Re-payment Mortgage: -13,712 (Rental return) + 340,000 (Capital appreciation) = AED 326,288

Return on Investment: 326,288 / 340,000 (Down payment) = 96% 

In either case Mr. Ali took advantage by investing in the Dubai property market and Dubai is still a growing and an appreciating market of the future.