Banks and real estate investors got a sigh of relief after UAE’s central bank governor today clarified on the proposed mortgage cap.
According to the governor of the apex bank Sultan Bin Nasser Al-Suwaidi, the circulars sent by the Central Bank setting the maximum value of mortgages for foreigners and nationals at 50% and 70% of the property values respectively are meant to only notify the banks that there is something to be introduced, reported UAE’s official news agency, WAM.
Al-Suwaidi, in statements to Abu Dhabi TV, made it clear that the circular sent recently to the banks does not set a date for enforcing the proposed regulations, adding that this is meant to give the banks enough time to adapt with the new reality to come with the issuance of the new system in the future.
The proposed regulations, however, will be effective after due consultations will have been made with banks whose feedback should be taken into consideration, Al-Suwaidi noted.
“Currently, there is no such system regulating real estate financing for individuals. This is now a proposed system to be issued in 6 to 9 months depending on when special procedures will be implemented. What has been issued now is a kind of consultation with the banks,” he clarified.
“We are not talking about percentages now. These are regulatory matters and are within the jurisdiction of the board of directors of the Central Bank, because the banks demand percentages be changed.” Al Suwaidi said.
However, Al-Suwaidi said the Central Bank of the UAE will regulate the mortgage market in six to nine months.
Experts had earlier opined that the confusion over the mortgage cap could cause lower investor confidence in the UAE real estate market as it lacks practicality.
Following the governor’s announcement, some banks in the UAE seem to have responded immediately and startedd offering loan-to-values (LTV) levels of 80 to 85 per cent, reported Emirates 24 7.
“Although, we haven’t got any circular from the UAE Central Bank on there being no mortgage cap, we have been asked to inform our customers of the new LTV. We have been told to inform our clients that we are back to our old LTV levels,” reported Emirates 24 7, quoting a mortgage consultant at a Sharjah-based bank.