News: Further restrictions on UAE mortgages – edited 21/01/13

EDIT 21st January 2013

According to an article published by Zawya issued today taken from Reuters:

“The United Arab Emirates central bank will not impose limits on mortgage lending without consulting commercial banks, and any new rules are not imminent, central bank governor Sultan Nasser al-Suweidi was quoted by a local newspaper as saying….
….But Suweidi was quoted as saying by Al Ittihad newspaper on Monday that there had been a “misunderstanding” in the media and that no central bank ruling had been issued, only a warning to banks to be prepared for rule changes in the future.”

This is rather strange as I have a copy of the notice that was issued to all banks and after it has set out the revised loan to value limits,  it clearly states that “all  banks and finance companies are required to comply with this notice”.

It seems that some back tracking is taking place…


Original post 31/12/12

Yesterday the UAE Central Bank issued a circular, to take immediate effect, limiting mortgage borrowing to no more than 50% of the value of the property for expats. This was largely unexpected and lenders are having to change their offerings immediately as many were previously lending 70-80% of a property’s value.

It appears that pre-approvals for higher loan to value mortgages are also being withdrawn and that will leave many people unable to proceed with a purchase. It will also severely restrict the remortgage market.

It appears that the Central Bank intended to stop the aggressive lending that fueled the boom years in the UAE property market and led to significant bad debts across the banking sector, something many are still saddled with.

The circular states that mortgages for expatriates are being limited to 50%
for their first property, and those to UAE nationals at 70% of the property’s value. For subsequent units, expats can borrow up to 40% with UAE Nationals being restricted to 60%.

There have been several claims recently that the UAE property market was showing an upturn, but this news will surely halt that as fewer people will be able to afford such large deposits and for the same reason will reduce the secondary market.

It’ll certainly be interesting to see the reactions of interested parties over the next few weeks. Happy New Year!

dubai property

About FinancialUAE

A qualified and experienced Independent Financial Adviser based in Dubai, UAE. Professional and ethical. Freelance writer on personal financial issues & the On Your Side column in The National. Founder of Facebook group British Expats Dubai. Senior Partner at Holborn Assets LLC, Dubai, UAE.
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2 Responses to News: Further restrictions on UAE mortgages – edited 21/01/13

  1. Saibz says:

    Hi, can you kindly answer this.. If someone has applied for a loan BEFORE this new rule was issued and the loan is still under process (the loan is not yet accepted/declined), will this new rule apply to that person’s loan application or will he have to pay according to whatever the rules were at the time he submitted his application?

    • financialuae says:

      It is still unclear as the circular from the Central Bank was very brief (I have a copy) and did not go into any detail. I suspect that any applications that have not been approved may be subject to the new rules, but you will need to approach the bank to find out how they intend to proceed.

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