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Mon 21 Jan 2013 10:06 AM

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UAE cen bank won't impose mortgage cap - governor

Limits on lending will not be imposed without first consulting commercial banks - report

UAE cen bank won't impose mortgage cap - governor
Sultan Nasser Al Suweidi, UAE Central Bank governor.

The United Arab Emirates central bank will not impose limits on mortgage lending without consulting commercial banks, and any new rules are not imminent, central bank governor Sultan Nasser al-Suweidi was quoted by a local newspaper as saying.

His remarks appeared to show the central bank was backing away from caps on residential mortgage lending that it announced just weeks ago in an effort to ensure another bubble did not build in UAE property prices.

A circular sent to commercial banks by the central bank late last month, and seen by Reuters, said mortgage loans for foreign individuals should not exceed 50 percent of property value for a first purchase of a home, and 40 percent for subsequent homes. Caps for UAE citizens were set at 70 percent and 60 percent.

But Suweidi was quoted as saying by Al Ittihad newspaper on Monday that there had been a "misunderstanding" in the media and that no central bank ruling had been issued, only a warning to banks to be prepared for rule changes in the future.

The central bank is working on new rules for real estate financing but they will take at least six to nine months to emerge, he added.

His office told Reuters that he was not immediately available to comment.

Last month's central bank circular was met by a storm of protest in the banking community, with bankers complaining that they were not consulted and that the new rules could hurt banks and slow the UAE real estate market's recovery from its 2008-2010 crash.

The Emirates Bank Association, the industry's lobbying group, met last week and agreed to submit formal proposals to the central bank to water down its rules.

Suweidi was quoted as saying on Monday that the real estate financing rules which the central bank would eventually issue were likely to include mortgage caps, but that banks' views would be incorporated and that the rules would help the sector.

"The new system that the central bank is preparing will allow more liquidity for the real estate sector," he said, adding that clearer rules on issues such as loan periods would make it easier for banks to operate.

"This will open the door for banks which are not offering real estate financing to enter this sector."

It is not the first time that the central bank has backed away from imposing regulations after protests by banks.

The central bank announced last April that from Sept. 30 last year, banks would have to limit their exposure to state-linked entities. Some big banks were above the limits when the deadline passed, and in December, the central bank announced it was suspending the rules while it consulted banks.

Similarly, requirements for banks to hold a certain proportion of their assets in liquid instruments were announced last year and then suspended.

poetic justice 7 years ago

this is hilarious. the central bank is now backtracking in the light of its poor decision and resistance from the banking sector, and is blaming the media to cover its tracks. priceless!

SAM 7 years ago

Great news! Thanks to the Central Bank Governor for taking this reasonable approach. Let all the banks sit together with Central Bank and decide on a plausible solution. The DBR of 50% of total income is already in place. Do we really need a cap on mortgage limit after that ?

Steady 7 years ago

This is hilarious, just look at the poll results on the same subject and same page, a full 50% vigorously sided with the (now defunct) central bank cap!

Rich Dad Poor Dad 7 years ago

Ok Ladies and Gentleman , I am very happy with this news and like to inform that I have just increased the price of my unit by 15%.
I hope this will not cause too much inconvenience.

Crazy 7 years ago

This is ridiculous. Sellers have now become even bigger lions and bumped up their prices higher. And i thought the cap was being introduced to 'control' the market. It couldnt be more out of control now!

nabi 7 years ago

i need 50000 AED for buy home
can you cooperate by me?
please responce

PAD 7 years ago

Very Nice . I am sure that this will be healthy and also that the Banks will ensure good whetting before they dole Mortgages . Even a 100% loan will be healthy for people who will not default

PRA 7 years ago

I will buy it from you at 20% premium as I can now afford it .50% downpayment on a property that is 15 or 30% down is just not practical .

Ahmed 7 years ago

Finally sense has prevailed. Although I believe there is a basis for a cap in the long run in this market, now is certainly not the time when the economy is recovering after having taken a brutal flogging and when liquidity is vital. Especially, a cap so drastic was unwarranted. Moreover, it would be useful if policies are thoroughly analysed and all parties are consulted before implementation, rather than a whimsical kick out of the blue.

K 7 years ago

This was purely a commercial scam to make people jump to the occasion and buy as fast as possible thinking that the law will disappointing...