By Gavin Gibbon
Abdul Aziz al-Ghurair, head of the United Arab Emirates Banks Federation, has revealed plans for a cap on loans
Banks in the UAE have advocated imposing limits on lending to the real estate sector in order to protect them from being over-exposed, according to media reports.
News agency Reuters has quoted Abdul Aziz al-Ghurair, head of the United Arab Emirates Banks Federation, as the country’s real estate sector continues to struggle with oversupply and weaker investment appetite amid lower oil prices.
Al-Ghurair said: “There is a draft paper for real estate lending with the UAE Banks Federation (UBF) and the banking sector which will review and give feedback to have a proper policy in lending cap for the real estate sector.
“This is to protect the whole economy, you can't have all your lending in one sector. If the sector is impacted, the whole banking industry gets impacted, this is a prudent decision.”
Lending to the residential real estate sector stood at AED243.5 billion ($66.3bn) in 2018, according to the UAE Banking Federation’s annual report. While the total domestic credit extended by banks was just over AED1.5 trillion ($408.4bn).
According to separate reports from Core and Dubizzle, released last month, residential sales and rent prices have continued to fall in 2019, although some popular areas have remained stable.
Earlier this year the Dubai Government set up a new real estate committee to ensure a better supply balance in the emirate through greater collaboration between government-related entities and private sector companies.