Banks pro­pose lend­ing caps to real es­tate com­pa­nies

The National - News - - BUSINESS - FA­REED RAH­MAN

Banks in the UAE are propos­ing a cap on lend­ing to real es­tate com­pa­nies to pre­vent over­ex­po­sure to the sec­tor, a top bank ex­ec­u­tive said.

Lend­ing to the res­i­den­tial real es­tate sec­tor stood at Dh243.5 bil­lion in 2018, ac­cord­ing to the UAE Bank­ing Fed­er­a­tion’s re­cently pub­lished an­nual re­port. To­tal do­mes­tic credit ex­tended by banks stood at just over Dh1.5 tril­lion.

“There is a draft pa­per for real es­tate lend­ing with the UAE Banks Fed­er­a­tion and the bank­ing sec­tor which will re­view and give feed­back to have a proper pol­icy [on a] lend­ing cap in real es­tate. The for­mula is in [the works],” said Ab­dul Aziz Al Ghu­rair, head of the UAE Banks Fed­er­a­tion and chair­man of Mashreq Bank.

Mr Al Ghu­rair made the com­ments while speak­ing at Fin­Tech Abu Dhabi yes­ter­day. He said the pro­posal on the lend­ing cap is still “in di­a­logue and could take a few months”.

“This is to pro­tect the whole econ­omy and lend­ing. You can­not have all your lend­ing in one sec­tor. If the sec­tor gets affected then the

Lend­ing to the res­i­den­tial real es­tate sec­tor stood at Dh243.5bn in 2018, fig­ures show

whole bank­ing sec­tor gets affected. This is a pru­dent de­ci­sion,” he said, with­out re­veal­ing fur­ther de­tails.

The UAE prop­erty market slowed af­ter a drop in oil prices that be­gan in 2014, as well as con­cerns about an over­sup­ply of properties. How­ever, ex­perts have fore­cast a re­cov­ery on the back of gov­ern­ment re­forms to en­cour­age in­vest­ment. These in­clude a new im­mi­gra­tion regime of­fer­ing long-term visas for in­vestors, Dubai’s Expo 2020, Abu Dhabi’s Dh50 bil­lion Ghadan 21 stim­u­lus and changes to the emirate’s free­hold prop­erty law.

The Dubai gov­ern­ment also re­cently set up a new real es­tate com­mit­tee to en­sure a bet­ter sup­ply bal­ance in the emirate through greater col­lab­o­ra­tion be­tween gov­ern­ment-re­lated en­ti­ties and private sec­tor com­pa­nies.

Cur­rently, loan growth for Mashreq and across the broader UAE market re­mains in sin­gle dig­its, Mr Al Ghu­rair said. On the prospects for loan growth next year, he said the UAE is in a bet­ter shape than much of the global econ­omy.

“In Europe, we have neg­a­tive in­ter­est rates – at least here, we don’t. A lower in­ter­est rate does im­pact banks neg­a­tively be­cause we have huge cap­i­tal, share­hold­ers’ eq­uity as well as huge de­posits. The lower in­ter­est rates, the less banks will make money,” he said.

Newspapers in English

Newspapers from UAE

© PressReader. All rights reserved.