Commercial banks have until 31 January to submit their feedback on the UAE’s new mortgage law, the central bank said.
Lenders and finance companies have been asked to put forward suggestions for a series of mortgage related issues including proposed loan-to-value rates and lending caps, the central bank said in comments published by the country’s state news agency WAM.
The notice follows a day after the central bank said it will look to introduce regulations for the Gulf state’s mortgage sector in the next six to nine months.
“Currently, there is no such system regulating real estate financing for individuals. This is now a proposed system to be issued in six to nine months depending on when special procedures will be implemented. What has been issued now is a kind of consultation with the banks,” said Sultan Bin Nasser Al-Suwaidi.
“We are not talking about percentages now. These are regulatory matters and are within the jurisdiction of the board of directors of the Central Bank, because the banks demand percentages be changed,” he added.
A circular sent to commercial lenders by the central bank in December said mortgage loans for expats should not exceed 50 percent of the property value of the first home and 40 percent for subsequent homes. Caps for UAE citizens were set at 70 percent and 60 percent.
Al Suwaidi’s comments appear to show the central bank is backing away from caps on residential mortgage lending after the Emirates Bank Association (EBA) submitted a formal proposal requesting the central bank ease the rules.
The cap follows a partial recovery of house prices in Dubai and new plans for several mega projects in the emirate. The central bank is seeking to prevent any repeat of the UAE’s property six year property bubble, which was followed by a crash.
The emirate was one of the worst hit real estate markets during the 2008 downturn but the emirate’s safe haven status amid regional political turmoil helped push up average prices by 19 percent last year, according to data from property consultants Jones Lang LaSalle.