An increase in bad debts related to mortgage exposures is “unlikely” in the UAE banking sector, reducing the odds of a repeat of the 2009 crisis, according to a new report.
Mortgage transactions in the UAE are rising “steadily” in 2016, when compared with the same period in 2015, according to GCP-Reidin data based on UAE Central Bank numbers.
The first quarter of the year saw 1,620 mortgage-lined transactions registered with the Dubai Land Department, reported Gulf News. The same period in 2015 saw 1,300 such transaction.
Overall banking exposure to real estate and construction by end of the first quarter of 2016 was $66 billion (AED242 billion), said the report.
“The propensity for bad loans in the real estate sector during this cycle has been significantly lower [compared with 2009],” said Sameer Lakhani, Managing Director at Global Capital Partners, said. “This suggests from a risk-adjusted perspective, banks will be more inclined to expand their credit portfolios to real estate. We are likely to see this accelerate in the run up to the Expo 2020.
“In the US, credit to the real estate sector has risen the most to over a third of overall lending in 2016. In the UAE, the figure is half that, at 17 percent, suggesting ample room for further lending. We expect this to be played out over the next decade.”
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