The United Arab Emirates central bank agreed to raise the cap on mortgage loans from an originally proposed 50 percent of a property’s value for expatriates, a person with knowledge of the matter said.
The regulator gave preliminary approval to a proposal of the U.A.E. Banks Federation, which represents banks, at a meeting with them yesterday, according to the person, who asked not to be identified because the information hasn’t been made public. The federation in January suggested that expatriates in the U.A.E. be allowed to borrow as much as 75 percent of the value of their first home, 60 percent for a second home and 50 percent for properties under construction. A call to the Abu Dhabi-based central bank outside working hours wasn’t answered.
Arabic daily Al Khaleej reported the story earlier today. The central bank in December had suggested a loan-to-value limit of 50 percent for a first home and 40 percent for a second home for expatriates. There were no caps on mortgages earlier.
Foreigners make up more than 80 percent of the population of the U.A.E., which includes Dubai and Abu Dhabi, according to government estimates. Dubai first allowed foreigners to own real estate in 2002, sparking a boom that attracted investors from India, Iran, Pakistan and Russia seeking to bet on rising prices. During the financial crisis, hundreds lost their jobs and left the city, defaulting on payments.
The federation had also recommended a cap of 80 percent for U.A.E. nationals for their first mortgage and 65 percent for their second home. The central bank had proposed limits of 70 percent and 60 percent respectively for citizens.
Property prices in Dubai, which suffered one of the world’s worst real estate crashes after the global credit crisis that began in 2008, started to recover last year. Apartment and villa rents in Dubai climbed by an average of 17 percent last year as investors used the business hub to shield themselves from the euro-zone crisis and the political upheaval known as the Arab Spring, Asteco Property Management said in January. Villa sale prices climbed an average 23 percent year-on-year and apartment prices gained 14 percent, the company said.