Emirates Banks Association Proposes 75% Mortgage Cap

United Arab Emirates lenders are proposing expatriates be allowed to borrow as much as 75 percent of the value of their first home after the central bank said such loans should be limited to half the property’s value.

The limit should be reduced to 60 percent for a second home loan and 50 percent for properties under construction, Emirates Banks Association Chairman Abdul Aziz Abdulla Al-Ghurair told reporters yesterday at an event in Dubai. The association, which includes lenders such as HSBC Holdings Plc and Emirates NBD PJSC, submitted proposals to the central bank, he said.

The group’s recommendations follow the regulator’s move last month to restrict mortgage lending to foreigners and nationals in the second-biggest Arab economy. The central bank proposed a 50 percent so-called loan-to-value limit for expatriates compared with no cap previously. Property prices in Dubai, which suffered one of the world’s worst real-estate crashes after the 2008 global credit crisis, started to recover last year.

“It’s in the interest of buyers to have a mortgage cap,” said Al-Ghurair, also chief executive officer of Dubai-based lender Mashreq PSC. “We don’t want everyone jumping in.”

Non-resident Cap

The association is also recommending a cap of 80 percent for U.A.E. nationals for their first mortgage and 65 percent for second homes, he said. The central bank had proposed limits of 70 percent and 60 percent respectively for citizens. For non-resident foreigners, the EBA is recommending that loan-to-value limits are capped at 50 percent, Al-Ghurair said. The group is also considering limiting the total value of a single mortgage to 25 million dirhams ($6.8 million), he said.

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 property in 2002, sparking a real estate 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 fled the city, defaulting on payments.

Real Estate Recovery

Apartment and villa rents in Dubai climbed an average 17 percent last year as the Persian Gulf business hub benefited as a haven from the eurozone crisis and the so-called Arab Spring, Asteco Property Management said yesterday in a statement. Villa sale prices climbed an average 23 percent year-on-year and apartment prices gained 14 percent, it said.

The mortgage cap won’t have a negative impact on the U.A.E.’s property sector as about 70 per cent of real estate sales are in cash, Al-Ghurair said. U.A.E. banks have about 60 billion dirhams of mortgage lending outstanding, he said.

The EBA is also urging the U.A.E. government to speed up the creation of a federal credit bureau where mortgages could be registered.


The central bank has asked lenders for their opinion on the planned mortgage limits in a questionnaire sent to banks, said Al-Ghurair. The regulations would be issued in six to nine months, governor Sultan Bin Nasser Al-Suwaidi said in comments published in state-owned al-Ittihad newspaper on Jan. 21.

“The intention of the central bank is to ensure the health of economy, real estate developers and the banking system,” said Al-Ghurair, who expects final mortgage limits to be implemented in the second half. “This is a dialog between the central bank and the Emirates Banks Association. We are taking things step by step to reach the final policy.”

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