UAE Banks Recommend 75% Mortgage Cap For Expats

The Emirates Banks Association has sent its recommendations on proposed mortgage caps to the UAE central bank.



The UAE’s Emirates Banks Association (EBA) confirmed that it has submitted a unified questionnaire representing views of all the banks on mortgage limits to the UAE central bank.

The recommendations suggest capping mortgages to expatriates at 80 per cent of the property’s value for the first house, and 60 per cent for subsequent homes. The limits for Emiratis were proposed at 75 per cent and 65 per cent respectively.

Late last year, the UAE central bank indicated that it is planning to introduce mortgage limits to regulate the country’s real estate sector.

The regular sent a circular to commercial banks at the end of December which stated that mortgage loans to foreigners should be limited to 50 per cent of the property value for a first purchase of a home, and 40 per cent for subsequent homes. Caps for Emiratis were set at 70 per cent and 60 per cent.

The news created a stir among banks, but soon after, the central bank clarified that the circular was not meant as a regulation, but purely as a guideline for an upcoming law.

Abdul Aziz Al Ghurair, the chairman of EBA told journalists last week that the central bank was holding negotiations with the commercial banks.

The new law is expected to be announced in the second half of 2013, he said.

As part of its recommendations, the EBA has also said that financing will be fixed at a maximum of seven years salary or total income for expatriates and up to eight years salary or total income for UAE nationals.

The accepted sources of repayments for both Emiratis and expatriates include salaries and/or any other verifiable regular source of income, including rental and business income, but exclude end of service benefit.

The maximum repayment period has also been fixed at 25 years subject to 70 years of age at last installment for Emiratis, and 25 years subject to 65 years of age at last installment (70 years if self-employed) for foreigners.

EBA also said that the central bank will include components to regulate transparency in the publishing of all fees and interest rates including the calculation of interest / profit rate (fixed / floating based on EIBOR) in its new regulation.

It also emphasised the “continued cooperation between Emirates Banks Association and the central bank to protect the borrowers, the banking sector and the national economy.”

Also read: New UAE Mortgage Law Expected In Second Half Of 2013