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Sun 13 Jan 2013 05:52 PM

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UAE plans new mortgage rules by mid-2013

Sources say central bank officials are planning regulations to add stability to sector

UAE plans new mortgage rules by mid-2013

The central bank of the UAE plans to issue broad regulations governing the housing mortgage industry by the middle of this year, aiming to ensure the stability of the sector, two sources familiar with the matter said on Sunday.

"The final pieces of the new mortgage regulations are being put together. It could be ready for issue by June this year," one of the sources told Reuters, declining to be named because the information has not yet been made public.

The regulations will deal with all important aspects of mortgage lending, the source said without going into details. A central bank spokesman declined to comment.

The source said the regulations would be discussed before being finalised with the Emirates Banks Association, the banking industry body, as well as with individual banks.

"There will be uniform criteria for housing finance. Banks and financial institutions involved in mortgages will have to adhere to the new regulations," a second source said.

The new rules would include, but be much wider in scope than, the mortgage limits which were introduced by the central bank at the end of last year.

Those limits capped mortgages taken out by foreigners at 50 percent of the property's value for a first purchase of a home, and 40 percent for second and subsequent homes. Caps for UAE citizens were set at 70 percent and 60 percent.

Commercial banks, complaining they were not consulted about the caps, are lobbying the central bank to relax them and delay implementation on the grounds they could disrupt the UAE property market's slow recovery from the crash of recent years.

The sources declined to comment on Sunday on whether the mortgage caps were likely to be relaxed. The central bank is believed to be keen to prevent the growth of another real estate bubble in the UAE, after the bursting of a bubble formed in the mid-2000s hit the economy hard.

Philip Ward, chief executive of Abu Dhabi Finance, a major provider of mortgages in the UAE, said the central bank's broad regulations, if well-designed, could benefit the industry.

"Clearly, regulations are better than no regulations because it brings clarity to lenders, developers and customers for a better understanding of their rights and responsibilities."

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SAM 7 years ago

There was no recent bubble formation in Dubai Real Estate market. The prices have fallen drastically to 1/3 levels which was unjustified. Now, the market was inching towards normalcy / fair price.
Dubai economy is bouncing back so why will the RE market not show positive trend ? Any effort by anyone to deliberately pull the market down will not be taken lightly by investors. The memory of 08-09 is still fresh in memory. They may not return soon.Hoping that Central Bank will be reasonable in taking action. DBR of maximum 50% income is already in place , any real effort should go to stop the flippers by putting a 5-10% duty on sale value within 6 months of purchase.

Hope someone is listening.

Dave R 7 years ago

Personally, I would prefer to see higher caps for foregin investors. I think 50% is far too low and should be around 80%, similar to second properties or buy-to-let properties in the UK.