UAE banks seek talks over expat mortgage cap

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Dubai Marina is one of the most popular areas for expats to live in the UAE.

Dubai Marina is one of the most popular areas for expats to live in the UAE.

Banking CEOs in the UAE are said to be keen to meet with central bank officials to discuss the regulator's plan to cap mortgages for expats.

Sources said heads of retail from members of the Emirates Banks Association, which includes lenders such as Emirates NBD and HSBC Holdings, will meet on Sunday, while the CEOs meeting with the regulator will follow, Bloomberg reported.

In a Central Bank circular issued on December 30, a 50 percent ceiling was placed on UAE expatriate mortgages, while a 70 percent limit was placed on mortgages for UAE citizens.

Banks will reportedly request that the UAE Central Bank raise mortgage limits for expats to 75 percent of the value of a first home and 85 percent for Emiratis.

Lenders will agree to central bank limits on mortgages for second homes, local media have reported.

On Thursday, it was reported that Dubai expats are scrambling to close property deals amid confusion over whether lenders will honour existing pre-approved mortgage deals.

Jean-Luc Desbois, managing director of mortgage brokerage Homematters, said around half of UAE lenders had so far adopted the 50 percent cap for new applications, while “a handful of banks are still business as usual”.

“At the moment everything is up in the air, it is confusing... We have had a number of banks who said they will honour all pre-approvals until they expire but some are looking at that and are making a decision,” Desbois said.

It is not clear if the 50 percent mortgage cap for foreigners applies to citizens of other Gulf Arab states, who have been keen buyers of Dubai property.

In the first half of 2012, Dubai saw 14,652 sales transactions worth AED30.8bn while 3,363 mortgage transactions were completed worth AED29.6bn.

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Posted by: abusidra

UAE Central Bank took a good decision which was al though late but better than never. Central Bank should stand by their decision and not bow to the Banks or internal pressure from lobbyists which made a mess of Dubai and of people's life by irresponsible banking and one sided rules. The Central Bank rules are like you keep an eye on your children when they are out for school, shopping or playing, this is not curtailing their independence or decision but it is caution /setting limits which is required of parents.

Posted by: Ayoola R Akanni

Banks will reportedly request that the UAE Central Bank raise mortgage limits for expats to 75 percent of the value of a first home and 85 percent for Emiratis.

Posted by: Prudent Management Partners JLT

Debt equity ratio of 2:1 for expats and 3:1 for nationals can be considered very healthy.

More balance can be attained by reducing tenure of the loan to 15 years max for expats and 20 years max for nationals.

The mortagae holders will reach the desired ratios by Central bank in 5-6 years time, which is very healthy.

Posted by: Navin

Debt Equity ratio for a house purchase!!! what next buy back of house equity, capitalization of rent and depreciation of brooms and bins! how about setting KPI's for house buyers.

Posted by: Awi

Dear Prudent Management Partners JLT,
You seem not very qualified for such a statement.
If this 50% rule were in place 2 years ago, I would not have been able to afford and buy the house I am currently living in. It's the only property I have in the UAE. By buying a house I am able to save part of my housing allowance. It shows also how attached and loyal I am to the country that provides me with a stable income.
But if I would not have been able to do so, I am not sure if I would still be around. I would have left the UAE. Not only does my own property save money, but it gives me a feeling of belonging and stability. I also don't have to deal with greedy landlords any more.
A 50% cap won't help anybody!! There are better ways to stop another real estate bubble, e.g. higher transfer fees if a property is sold within a certain timeframe.
My 2 cents worth....

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