The Central Bank has ended controversy surrounding new caps on banks’ mortgage credit in the UAE, saying it has not yet enacted any laws in this respect.
Central Bank Governor Sultan bin Nassir Al Suwaidi, in his first comment on the issue, said he had not sent any circular in this regard to the country’s 51 banks, but added that the Central Bank is working on new cap rules.
“The Central Bank has not sent any circulars to banks asking them to enforce new cap rules for mortgage credit,” he told the semi-official daily Al Ittihad.
“We have only issued an alert to banks telling them that the Central Bank is currently preparing a new mortgage credit system, which will cap such credits. We only asked banks to brace for these rules.”
Suwaidi said the new rules could be enforced within six to nine months only after they are discussed with the country’s banks.
“What has happened here is a misunderstanding by the media. We have not issued any circular or decision in this respect. What we issued was only an alert to banks regarding new rules and criteria which they should expect,” Suwaidi said.
“The new system will lead to an increase in liquidity to the real estate sector when it is enforced. We are now planning to conduct a survey among the banks regarding the proposed cap for the mortgage credit and associated rules. After we each a proposal, it will be presented to the Central Bank’s board for approval.”
Suwaidi said the new system would boost mortgage lending in the UAE, the second largest Arab economy, as all issues related to the period of credit, monthly installments and mortgage will be clear to banks and clients.”
“This will of course open the door to banks which have been reluctant to provide mortgage credit to enter this field,” he said.
On December 31, the Central Bank was reported by the Arabic language media as telling local banks to limit their mortgage loan to expatriates to 50 per cent of the property value of the first unit and 40 per cent for the second and other units.
Credit to Emiratis was capped at 70 and 60 per cent respectively.
Unlike Saudi Arabia, the UAE, the second largest Arab economy, does not have a mortgage law but is planning to enact such legislation.