(MENAFN- Khaleej Times) The UAE plans to restrict mortgages for foreigners to 50 per cent of the property's value, threatening to derail a nascent recovery in Dubai home prices after more than three years of declines.
UAE citizens can get as much 70 per cent of the value of a first house and 60 per cent for a second, according to guidelines issued by the central bank and obtained by Bloomberg News.
Foreigners can get mortgages of as much as 40 per cent of the value of a second property, according to the document. The central bank's public relations department declined to comment when contacted by Bloomberg News on Monday.
"In the short term, it's a negative because it will stop the hike in real estate prices that we've seen so far," Tariq Qaqish, deputy head of asset management at Dubai-based Al Mal Capital, said by telephone.
"Since most buyers these days are end-users, you might see prices decline because not everyone can afford to put in a 50 per cent down payment."
Tighter lending restrictions imposed by the UAE central bank this year may act as a brake on the rise in home sales and prices in the emirate. Foreigners make up more than 80 per cent of the population of the UAE, according to government estimates. No date for implementing the new policy was given in the circular. There were no loan-to-value limits previously some banks lend as much as 90 per cent of the property's value.
"We will be in discussions with the central bank on the implications of the circular for mortgage lending and the real estate industry and how the new rules will be implemented," Suvo Sarkar, the head of retail banking at Emirates NBD, the UAE's biggest bank by assets, said by phone on Sunday.
In the long-run, Sunday's regulations "will be positive, and this will help keep inflation in check," Qaqish at Al Mal said. "Ultimately, more end-users will be able to afford to buy properties here and the economy will benefit."
The number of property deals in Dubai jumped 50 per cent in the first half of 2012 from a year earlier, data from the Land Department show. The purchases, valued at Dh12 billion ($3.3 billion) though are still 74 per cent less than the Dh46.5 billion of sales in the first half of 2008.
Overall real estate mortgage loans at the UAE's 51 banks stood at Dh162.61 billion at the end of August, having risen by Dh1.1 billion from the end of 2011, according to data on the central bank website.
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