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UAE banks' real estate exposure seen at 26%

Dubai banks’ exposure to the troubled real estate sector is 26 percent – the highest in the GCC, a new report has said.

Bahrain was found to have the second highest exposure with 23 percent, followed by Kuwait (16 percent), Qatar (10 percent) and Abu Dhabi (9 percent).
However, contraction in banks’ asset base with expected losses from real estate loans will present good distressed investment opportunities in the UAE, Kuwaiti investment bank Markaz said in the report.

Toxic real estate loans "should lead to lower willingness and ability to RE [real estate] lending in UAE thus providing distressed investment opportunity", the report said.

In January Credit Suisse said UAE banks could have as much as 35 percent exposure to the real estate industry, which has been battered by the financial downturn as prices have fallen 50 percent and billions of dollars worth of projects have been delayed or cancelled.

Property prices in Dubai and Abu Dhabi have fallen by 47 percent since their peak, the report added.

UAE banks’ provision for non performing loans rose 44 per cent in August compared to the same period last year, figures from the Central Bank showed on Sunday.

Banks set aside AED26.3bn ($7.2bn) up from AED18.3bn, according to the Central Bank.

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