Group proposes 75% cap on mortgages for foreigners in UAE

DUBAI: United Arab Emirates lenders are proposing expatriates be allowed to borrow as much as 75% of the value of their first home after the central bank said such loans should be limited to half the property’s value.

The limit should be reduced to 60% for a second home loan and 50% for properties under construction, Emirates Banks Association (EBA) chairman Abdul Aziz Abdulla AlGhurair told reporters on Sunday at an event in Dubai. The association, which includes lenders such as HSBC Holdings Plc and Emirates NBD PJSC, submitted proposals to the central bank, he said.

The group’s recommendations follow the regulator’s move last month to restrict mortgage lending to foreigners and nationals in the second-biggest Arab economy. The central bank proposed a 50% socalled loan-to-value limit for expatriates compared with no cap previously. Property prices in Dubai, which suffered one of the world’s worst real-estate crashes after the 2008 global credit crisis, started to recover last year.

“It’s in the interest of buyers to have a mortgage cap,” said AlGhurair, also chief executive officer of Dubai-based lender Mashreq PSC. “We don’t want everyone jumping in.”

The association was also recommending a cap of 80% forUAEnationals for their first mortgage and 65% for second homes, he said. The central bank had proposed limits of 70% and 60% respectively for citizens. The EBA is also considering limiting the total value of a single mortgage to 25 million dirhams (US$6.8mil), he said.

Foreigners make up more than 80% of the population of the UAE, which includes Dubai and AbuDhabi, according to government estimates. Dubai first allowed foreigners to own property in 2002, sparking a real estate boom that attracted investors from India, Iran, Pakistan and Russia seeking to bet on rising prices. During the financial crisis, hundreds lost their jobs and fled the city, defaulting on payments. –