UAE mortgage law in 6-9 months - cen bank

Cap on mortgage lending will be introduced following talks with lenders, no set percentage yet
UAE mortgage law in 6-9 months - cen bank
Dubai skyline (Bloomberg Images)
By Claire Valdini
Tue 22 Jan 2013 09:13 AM

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.

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