UAE to limit home loans to foreigners
Dubai, December 31, 2012
The United Arab Emirates central bank has decided to limit mortgage loans for foreigners buying residential real estate in the country to 50 percent of the property's value, banking and real estate industry sources said on Sunday.
The restriction is contained in a circular issued to commercial banks, the sources said, speaking on condition of anonymity because of the sensitivity of the issue.
Central bank officials could not be contacted for comment.
The central bank's instructions to commercial banks are often issued through circulars that are not provided to the public.
The central bank's move appears to be an effort to ensure that another bubble in UAE real estate does not develop. Property prices plunged by more than 50 percent between 2008 and 2011, triggering a corporate debt crisis in Dubai that forced the restructuring of billions of dollars of debt.
This year, residential prices in parts of Dubai began to recover and property developers laid plans for new high-end projects; the central bank may want to head off the wild speculation that characterised the last property boom.
However, bankers said they were shocked by the circular, which could hurt confidence in the real estate market's recovery and hurt the share prices of property developers and banks.
"They are trying to regulate banks, but are controlling consumers by giving them limited choices," a senior executive at a local bank told Reuters. "It will lead to less investment by end-users."
An Abu Dhabi-based analyst said: "If implemented, this will impact on the real estate sector. After the property market improved, some banks had started lending up to 85 percent on some projects."
The analyst added: "It's positive when we look at the financial and lending perspective, but the question is whether this lending cap is practical."
A real estate industry source said that in addition to the 50 percent cap for foreigners, a 70 percent limit had been introduced on mortgages for UAE citizens. But it is not clear whether the caps are recommendations or absolutely mandatory, the source said.
Expatriates make up the vast majority of the UAE's population of roughly 8 million. Foreigners are allowed to buy property in designated areas; many from countries such as Iran and India have done so because they see the UAE as a haven from political and economic instability in the region.
It is not clear if the 50 percent mortgage cap for foreigners applies to citizens of other Gulf Arab states, who have been keen buyers of Dubai property.
The UAE central bank has previously sought to regulate the lending of commercial banks to reduce risk, only to back off after the banks protested.
The central bank announced in April this year that from Sept. 30, banks would have to obey caps on their exposure to state-linked entities. Some major banks remained above the limits when the deadline passed, and earlier this month, the central bank announced it was suspending the rules while it consulted further with banks. - Reuters
More Construction & Real Estate Stories
- Emaar rules out plans for new tall tower
- Barwa net profit surges 27.3pc
- RAK Properties adds new villas to Flamingo project
- Saudi launches housing scheme to ease shortage
- R&M wins Oman residential project contract
- Asian skyscraper prices tower over rest of the world
- Tamleek opens new office in Dubai
- $29m allocated for Bahrain drainage projects
- Indian group plans $300m Bahrain Bay investment
- Drake and Scull awards key supply contract
- FCC wins $702m Doha metro line contract
- SPF Realty sees Dubai project success
- Abu Dhabi set for big property show
- Aldar working on $1.5bn UAE housing projects
- Gulf Finance House to start $3bn Tunisia project
- Abu Dhabi to see 10pc surge in new homes
- Saudi construction sector booming on new contracts
- Emaar offers 330 apartments in MBR City
- Dubai Design District sees big demand
- HUGE DEAL: Arabtec inks $40bn Egypt housing project
- Galfar ex-CEO gets 15 years' jail over bribes
- $32m BFH car park work underway
- Bahrain awards $5.8m project tenders
- Spinneys to set up distribution centre at Kizad
- Dubai unveils $300m hitech 'green' city project
- Deyaar plans $245m Dubai complex
- IFA unveils $272m Dubai mixed-use project
- CBRE tops Fortune’s most admired firms list
- Kuwait's real estate sales hit $1.1bn in Jan
- Dubai RTA awards $27m roads contract