The UAE Central Bank will introduce regulations for the Gulf state’s mortgage sector in the next six to nine months following a consultation with commercial lenders, the central bank governor said.
A circular issued December 31 capping mortgage loans for foreigners and Emiratis is not effective immediately, Sultan Bin Nasser Al-Suwaidi said in comments published by the UAE’s state news agency WAM.
“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,” he said.
The circular 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. However, Al-Suwaidi said that these percentages were not yet definite. “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."
Banking sources earlier said lenders requested the cap be raised to 60 percent of the value of the property. “The suggestion agreed at the meeting is to raise the mortgage cap [for purchases of first homes] to 60 percent for non-nationals and 80 per cent for nationals,” one banker told Reuters.
The cap follows a partial recovery of house prices in Dubai and new plans for several mega projects in the emirate. The city was one of the worst hit real estate markets during the 2008 downturn but its subsequent safe haven status amid regional political turmoil has helped push up average prices by 19 percent last year, according to data from property consultant Jones Lang LaSalle.