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Discuss this article (13 Comments)Bank raises expat salary limit for loans by 200%
by This email address is being protected from spam bots, you need Javascript enabled to view it on Wednesday, 14 January 2009
LOAN LIMIT: Emirates NBD has raised its minimum salary requirement for expats to qualify for a mortgage by more than 200 percent. (Getty Images)
Emirates NBD, the largest bank in the Middle East, has hiked the minimum salary limit for expatriates seeking a mortgage by more than 200 percent and doubled the threshold for locals, Arabian Business can reveal.
In a tightening of its lending policy, the bank, which was formed by the merger of National Bank of Dubai (NBD) and Emirates in 2007, is only considering expatriate customers for a home loan if they earn a minimum of 25,000 dirhams ($6,800) a month, up from a previous limit of 8,000 dirhams.
Emiratis must now earn 20,000 dirhams a month, up from 10,000 dirhams.
A spokesman for the bank refused to comment on Wednesday, but added: “These [lending policies] are regularly changed according to market conditions.”
The change in lending policy from Emirates NBD, which was introduced last month, will exacerbate the problem of mortgage availability in the UAE, making it even harder for low to middle income earners to secure financing to buy a home.
It comes two months after an internal Emirates NBD email was leaked to Arabian Business which stated that the bank was suspending loan facilities to all expatriate employees of real estate companies, who are currently laying off thousands of staff due to a slowdown in the industry.
Emirates deny this is company policy, despite sources inside the bank who have repeatedly told Arabian Business that the decision to not to lend to expats at property companies is still firmly in place.
Other banks in the UAE are reigning in their lending criteria as well. In November, it emerged Lloyds TSB had raised the monthly salary limit for a personal loan from 12,000 dirhams to 25,000 dirhams.
In the same month, HSBC doubled the minimum salary someone must earn to qualify for a mortgage from 10,000 dirhams to 20,000 dirhams.
The UAE government has moved to ease the liquidity situation. At the end of Sept, the UAE Central Bank unveiled plans to pump $13.6 billion into the banking system. Three weeks later, an extra $19 billion cash injection was announced.
READERS' COMMENTS
Disclaimer: The views expressed here by our readers are not necessarily shared by ArabianBusiness.com or its employees.
Understandable
Posted by Dan, Stockholm, Sweden on Thursday 15 January 2009 at 18:06 UAE time
This makes sense. Most of the economy was based on real estate and it went bust. Most people used to work in real estate or businesses supporting real estate. They know it will not recover for a long time and a lot of people will lose their jobs. This limit is just for show. No matter how much your salary, you will not get a loan. We all know the reality, so we should not be surprised.
Would you give loans in these circumstances? Especially when the banks don’t have a dirham?
Posted by Dan, Stockholm, Sweden on Thursday 15 January 2009 at 18:06 UAE time
This makes sense. Most of the economy was based on real estate and it went bust. Most people used to work in real estate or businesses supporting real estate. They know it will not recover for a long time and a lot of people will lose their jobs. This limit is just for show. No matter how much your salary, you will not get a loan. We all know the reality, so we should not be surprised.
Would you give loans in these circumstances? Especially when the banks don’t have a dirham?
banks
Posted by ABC on Thursday 15 January 2009 at 16:32 UAE time
Just today I had ADCB calling me to offer me an amazing deal.. :) tie up my savings with them for 6 to 12 months and get 6 or 7% returns (subject to change at banks discretion(obviously only downwards then)) Only a short while ago before the bubble burst and they were over leveraged on real estate deals, they turned me down for a car loan of 100k on the basis that my FZE company was 11 months old not 12 months old, all this despite having 100k in a 12 month fixed term deposit and more than 200k in other accounts... needless to say I closed business, staff and a couple of personal accounts with them over the issue (they lost 5 accounts in total leaving only one current account standing)
Now they are crying out for deposits so they can lend/recover bad debts... what a shame the loans system wasn't based on credit history/customer profile rather than the standard 6 month salary transfers..
I for one will loose no sleep over their new dilema
Posted by ABC on Thursday 15 January 2009 at 16:32 UAE time
Just today I had ADCB calling me to offer me an amazing deal.. :) tie up my savings with them for 6 to 12 months and get 6 or 7% returns (subject to change at banks discretion(obviously only downwards then)) Only a short while ago before the bubble burst and they were over leveraged on real estate deals, they turned me down for a car loan of 100k on the basis that my FZE company was 11 months old not 12 months old, all this despite having 100k in a 12 month fixed term deposit and more than 200k in other accounts... needless to say I closed business, staff and a couple of personal accounts with them over the issue (they lost 5 accounts in total leaving only one current account standing)
Now they are crying out for deposits so they can lend/recover bad debts... what a shame the loans system wasn't based on credit history/customer profile rather than the standard 6 month salary transfers..
I for one will loose no sleep over their new dilema
Banks increasing the mortage interest rates
Posted by Malik, Jeddah, KSA on Thursday 15 January 2009 at 14:48 UAE time
I thik by doing this they are going to kill the real state market which represent a new important economic sector for UAE. This is will make it more difficult/impossible for the end users to purchase a home.
My mortage provider Amalk increased my interest rate starting Jan 2009f rom 7.75% to 9.75% (imagine 2% increase) while the interest rate are decreasing around the world.
Posted by Malik, Jeddah, KSA on Thursday 15 January 2009 at 14:48 UAE time
I thik by doing this they are going to kill the real state market which represent a new important economic sector for UAE. This is will make it more difficult/impossible for the end users to purchase a home.
My mortage provider Amalk increased my interest rate starting Jan 2009f rom 7.75% to 9.75% (imagine 2% increase) while the interest rate are decreasing around the world.
Banks Lending
Posted by stuart mayhead, Dubai, UAE on Thursday 15 January 2009 at 14:44 UAE time
What we have now all learnt is that the banks actually went bust and were kept afloat by the initial Government loans. The banks then prioritised their own balance sheets and have set about securing their own commercial future. Part of this future will be achieved by reducing the risks that they take. Only once they feel that they are on safer ground will they start to lend in large amounts again. The UK Government has realised that they need to 'cover the risk' for the banks and have offered to guarantee the loans. Hopefully this will enable the banks to increase their exposure and lend more money. However what is important here is that we are in new territory and we are all learning as we go. Let’s hope we get it right!
Posted by stuart mayhead, Dubai, UAE on Thursday 15 January 2009 at 14:44 UAE time
What we have now all learnt is that the banks actually went bust and were kept afloat by the initial Government loans. The banks then prioritised their own balance sheets and have set about securing their own commercial future. Part of this future will be achieved by reducing the risks that they take. Only once they feel that they are on safer ground will they start to lend in large amounts again. The UK Government has realised that they need to 'cover the risk' for the banks and have offered to guarantee the loans. Hopefully this will enable the banks to increase their exposure and lend more money. However what is important here is that we are in new territory and we are all learning as we go. Let’s hope we get it right!
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