UAE cen bank agrees on mortgage caps

Report says bank agrees to proposal on 80 percent cap on lending to expats for first home
UAE cen bank agrees on mortgage caps
UAE Central Bank governor Sultan Nasser Al Suwaidi
By Reuters
Thu 28 Mar 2013 10:13 AM

The United Arab Emirates central bank has agreed, in principle, to soften plans to introduce limits on mortgage lending for residential properties following a plea by commercial banks, central bank and banking sources said on Thursday.

After a meeting with bank executives on Wednesday, the central bank agreed in principle to banks' demands that caps on mortgages should be set at 75 percent of the value of a property for foreigners who are first-time buyers and 80 percent for local citizens, the sources said.

Ratios for subsequent homes would be 60 percent for expatriates and 65 percent for UAE nationals.

The central bank in December had announced plans to limit mortgages to 50 percent for first-time foreign buyers and 70 percent for locals, while levels for subsequent homes would be set at 40 percent and 60 percent.

The measure aimed to prevent a repeat of the 2008 real estate crash, which saw prices in Dubai and Abu Dhabi slump around 50 percent from their peak. Banks in the UAE have been able to lend 100 percent of a property's value to home buyers.

The central bank backtracked on its plan in January following a howl of protests from local banks and agreed that new rules would only be introduced after consultations with lenders.

"A preliminary approval has been given on the loan-to-value (LTV) proposals made by the Emirates Banks Association on behalf of banks," a central bank source said. The EBA is an industry body, which was recently renamed the UAE Banks Federation.

"But it has to be approved by the central bank's board of directors," he added, asking not to be named as final approval is pending.

Commercial banks were awaiting further instructions from the central bank over how to proceed, an Abu Dhabi-based banker said, also confirming the meeting and its results.

Central bank spokesmen declined to comment on the subject.

Foreigners account for about 80 percent of the UAE's population of roughly 8m and are major buyers of real estate in designated areas where they are permitted to own property.

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