The most common stop for financial agreements
regarding boats is the banks, boat dealers and credit unions are also excellent places to check for financial deals.
Dubai is fast evolving as a preferred marine sports destination because of the numerous waterfront properties being developed here and the quality of facilities and services being offered by most of them. The leisure boat market in the UAE has grown rapidly in the last two years.
Findings of the Arab Marine Industry Survey, unveiled at the Dubai International Boat Show in 2007 indicated that there has been a dramatic increase in boats of all sizes on the region's seas.
Better berthing facilities, modern boat repair yards, clubhouses customised to meet demands of boat owners and rising popularity of activities such as fishing, diving and sailing are encouraging more residents of Dubai to enter the leisure boat market.
Local and international banks have seized this opportunity by creating a range of financing options for boat owners with packages similar to those available in mature markets such as Canada, Hong Kong and the USA.
The usual loan requirements are a 30 per cent down payment and a valid boat and life insurance. Loans are either available for the purchase of new boats or construction of luxury boats.
The most common stop for financial agreements regarding boats is the banks, though there are other institutions that offer rates and terms that are competitive with what banks offer.
Boat dealers and credit unions are also excellent places to check for financial deals. While looking for good boat financing deal, it is important to check with more than one financial organisation or dealer to find the best possible deal, keeping in mind the financial situation at hand and the organisation's level of expertise in the field.
According to Sean Drury, Managing Director of HSBC Middle East Finance Company Ltd (MEFCO), "We consider certain factors before offering to finance a boat.
These include cost and application of the boat, geographical domicile and usage of the boat and strength of the credit application." HSBC MEFCO was the first bank to launch a branded leisure boat finance proposition in the UAE.
It provides its existing high net worth premier customers (with liquid assets of between $100,000 and $2 million) the opportunity to finance their leisure craft by means of a hire purchase agreement. A 30 per cent minimum down payment is required, coupled with flexible finance periods ranging from 12 to 60 months.
The National Bank of Abu Dhabi has the Al Bahar scheme for financing boats up to Dh350,000 and the Al Nokhada scheme that finances luxury boats and yachts up to Dh5 million. According to officials at the National Bank of Abu Dhabi, the salary and position of the individual, length of service, cash flow and repayment capability are some of the factors that are considered before financing a boat, whose depreciation is usually higher than cars, trucks and heavy equipment.
"Depreciation depends on the boat size and the manufacturer, but it is generally accepted as 15 per cent per annum," says Drury. The Abu Dhabi Islamic Bank offers a Sharia-compliant product for boats.
The Qawarib product is unique as it offers the chance to finance motor speed boats, jet skis and yachts, from Dh30,000 to Dh1 million. This product is offered to both UAE nationals and residents.
For boat owners insurance is mandatory as a tool for mitigating risk as well as to compensate the owner in case of total loss. It is needed to protect the value of the asset against incidental damage.
According to Ajit Kumar Varma, Marine Insurance Manager for Royal & SunAlliance UAE: "When insuring your boat you need to ensure that its valuation (hull and machinery) are on a market value basis.
You also need to provide adequate insurance cover on the personal belongings you take along when sailing. Your boat insurance should be comprehensive and provide complete protection of the vessel and its occupants.
The insurance should include protection against loss of or damage to hull and machinery in addition to protection of personal belongings, passengers and their legal liability towards the public whilst sailing. When insuring a boat that is not new, it is advisable to get the boat evaluated by a competent marine surveyor who will provide a conditions survey report."
Verma adds, "The UAE is the right place for water sports lovers. With massive water front developments taking place and with favourable weather conditions for most parts of the year, yachting activities are expected to grow in the next few years. But in order to relax and enjoy the sport, yachts should be insured for the current market value.
This is particularly relevant to buyers of a used or second-hand boat. All sailing equipment and other contents in the yacht should also be insured for their full value. Most people in the UAE look for a third-party insurance cover limit of Dh1 million. It is also important to check the territorial limits within which the sailing activity is insured. Insurance companies usually provide yacht insurance cover for sailing in UAE waters, but some have a wider GCC cover."
According to Mahmoud Alodeh, Senior Manager, Marine and Aviation of Oman Insurance Company, as with any other type of property, insurance is necessary for a boat to protect owners from severe financial loss.
However, if the owner chooses not to buy his own damage insurance, third party legal liability is mandatory to protect the owner from third party loss of life or property damage caused by his boat.
"There are certain factors to be considered before insuring a boat. The age of the craft; the material of construction (such as steel, aluminium or wood); cruising limits (whether trading in territorial waters, confined waters or in international waters); size and type of yacht (whether power boat or sail yacht); owner's occupation and previous loss records; frequency of use; type of use (commercial or private); where the yacht is moored when not in use; experience and certification of the captain in respect to large yachts; limit of third-party liability; horse power of engines and whether engines are inboard or outboard; and other extensions such as medical expenses of owner and crew," says Alodeh.
Inspection, according to Alodeh, is not required for small boats and new boats. However, inspection is necessary for old and large yachts.
Large yachts are usually classified by one of the international classification societies. Charles F. Cholet, owner and investor of ICL Inspectorate Ltd, a marine inspection and certification company, said, "Pleasure craft and boats, whether wind or engine powered, should be periodically inspected by an independent third party once every 12 months.
"The Coast Guards of the Emirates enforce a code of practice to ensure that each vessel is registered and checked on a yearly basis since the construction and structure of such vessel is often overlooked by the untrained eye.
Vessels often set out to the sea with barnacles, debris and foreign matter attached to the hull, thus reducing the efficiency of the vessel and violating safety regulations.
By obtaining a compliance certificate of fitness, owners can make their vessel seaworthy and suitable to be insured to its value.
Boats depreciate similar to any other material item and by maintaining a regular service log, and complying with a yearly certification, it can maintain a good market price even after many years."
