Nov. 12 (Bloomberg) -- Emirates NBD PJSC may guarantee capital that investors lend to Dubai developers as the United Arab Emirates' biggest bank reached the limit it can provide to property companies, threatening the city's real-estate projects.

``The idea is to increase your exposure and help stabilize a market that you are already invested in, reaping the benefit when the market recovers,'' Michael Preiss, Emirates NBD's chief investment officer, said in an interview in Dubai today. ``It is our responsibility as the biggest bank in Dubai to keep up the umbrella when it is raining.''

U.A.E. stock markets have plunged this year as oil prices declined and on fears that the credit crisis will make it more difficult for the gulf state's companies to borrow money. The country's central bank set up a 70 billion-dirham ($19 billion) fund for banks to ease liquidity constraints caused by the seizure of global credit markets.

The Dubai Financial Market General Index today extended the slump for the year to 63 percent and Emaar Properties PJSC, the Middle East's biggest publicly traded developer, dropped to the lowest in four years. Dubai property prices, including villas and apartments, fell 4 percent in the month to October, while in Abu Dhabi they declined 5 percent, HSBC Holdings Plc said in a report today. The report is the first statistical evidence of a weakening housing market in the U.A.E.

Confidence

``It is not really helpful to get around central bank limits on systemic risk,'' Raj Madha, a Dubai-based banking analyst at EFG Hermes Holding SAE, said in a phone interview. ``It does not give me confidence that a bank's actions are an efficient way to achieve social aims.''

HSBC and Lloyds TSB Group Plc, two of the largest U.K. banks operating in the U.A.E., are reducing lending in Dubai. The restrictions come after house prices in the emirate quadrupled in the last five years, stoking speculation that a drop is imminent.

Dubai's plans, including the Disney-like ``Dubailand'' that will be three times the size of Manhattan, are expected to double the number of tourists annually to 15 million visitors by 2015. The emirate is racing against Saudi billionaire Prince Alwaleed bin Talal's investment company to build the world's first kilometer-tall tower.

``Extending credit during a credit crunch is a role our shareholders believe the bank should play,'' Preiss, the top investment official at the Dubai state-controlled bank, said. He declined to say what percentage of its total exposure the bank is allowed to have to the real-estate industry.

To contact the reporters on this story: Sean Evers in Abu Dhabi at evers@bloomberg.net

Last Updated: November 12, 2008 09:46 EST