2.31 PM Friday, 29 March 2024
  • City Fajr Shuruq Duhr Asr Magrib Isha
  • Dubai 04:56 06:10 12:26 15:53 18:37 19:52
29 March 2024

85% - or more - home finance still available in the UAE

Published
By Parag Deulgaonkar

Home buyers can still borrow up to 85 per cent of the property value in the UAE, as the Central Bank’s new mortgage regulations have not come into effect.

Three bankers confirmed to Emirates 24|7 that though they were expecting implementation of Central Bank’s new guidelines on home loans from December 1, no information was yet available on when the new rules will come into force.

“We were previously informed that the new rules will come into force from December 1, but till now we are lending at the previous loan-to-value (LTV) ratio,” a senior official of a local bank said on conditions of anonymity.

Another bank official working with an Islamic bank confirmed that they had also not got any information on when the new mortgage rules will come into force.

The UAE Central Bank issued new mortgage lending regulation late October, which allows banks to provide loans of up to 80 per cent of the property value to Emiratis and 75 per cent to expatriates.

If UAE nationals seek loans for a second house/ investment property, the loan eligibility shall not exceed 65 per cent of the value of the property, while expatriates buying second house will be eligible only for a mortgage of up to a maximum of 60 per cent of the property’s value. The maximum LTV for mortgage on property being purchased off-plan is set at 50 per cent, regardless of the purpose, value or category of the purchaser.

The rules, the Central Bank has said, will come into effect one month after being published in the official gazette.

The new rules even bars home buyers from using personal loans or credit cards to meet their down payment requirements.

Last month, UAE Central Bank Governor Sultan Nasser Al Suwaidi said the new limits on mortgage loans would help the banking sector.

“That will be beneficial to the market because it will define for all banks what is possible, what is not possible,” he said on the sidelines of the World Islamic Economic Forum in London.

The UAE Central Bank's Financial Stability Review in September 2012 put UAE banks' direct residential mortgage exposure at Dh37 billion for nationals and Dh37.6 billion for expatriates as of year-end 2011. The total represents less than 7 per cent of the UAE banks' net loans and advances at the time.

In a report on the impact of the new mortgage regulation, Standard & Poor’s Ratings Services said: “Although we believe this exposure will likely have increased since then — in line with the increased volume of real estate transactions in 2012 and 2013 — we would still expect that residential mortgages constitute less than 10 per cent of the UAE banks' lending books. We consequently expect the direct impact from the regulation on the aggregate lending to be rather limited.”