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21 May 2024

Mortgage cap: UAE bankers want above 60 per cent for first-time expat property buyers

By Parag Deulgaonkar

A UAE bankers’ association is seeking to delay the implementation of the mortgage cap announced by the UAE Central Bank by at least a month and will then seek a revision of the mortgage cap, banking industry sources said.

A banker, who attended the Emirates Banks Association meeting on Sunday, told ‘Emirates24|7’, on condition of anonymity, that the association would be asking delay implementation of the circular by 30 days with a request being sent to increase the cap above 60 per cent for first- time expat property buyers and 80 per cent for locals.
The association, he said, would not be seeking any change in the cap set for second and subsequent homes.
A UAE Central Bank circular on December 31 said mortgage loans for expats should not exceed 50 per cent of the property value for a first purchase of a property and 40 per cent for second and subsequent homes, while for UAE citizens it was set at 70 per cent and 60 per cent, respectively.
The apex bank is understood to have taken the step to pre-empt a surge in the banks' non-performing loans, which seem to have peaked at about 20 per cent of some banks' overall loan book.
Besides, industry participants say the move will be a drag on the UAE property market in the short term as end-users will find it difficult to cough out half the value of the property in cash.
Last week, this website had reported that banks had started informing customers that the old mortgage pre-approval letters stand cancelled and new loan-to-value (LTV) ratio stand as per the Apex Bank's directive.
"There was a meeting of our sales person last (Sunday) night and we were informed to tell our customers that their pre-approval letters stand
cancelled. From January our LTV will be only 50 per cent of the home value," the banker said on conditions of anonymity.
"The applications being processed at the older LTVs will go ahead, but all our sales agents have been advised to market our product as the Central Bank guideline."
Sam Wani, General Manager, Independent Finance, had told this website: "Huge numbers of end users are looking to buy a home.
“We have a massive pipeline running all the way to the second quarter of 2013. Many organisations were planning their forecasts and putting business plans in place.
"The said circular could have some implications on the property market, however, the exact details are not public yet. We will be consulting with our colleagues in the banks and real estate industry to look at the implementation of the circular."