New measure is to protect the whole economy and banking sector, says Abdul Aziz Al Ghurair, head of the UAE Banks Federation 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.<\/p>\n
Lending to the residential real estate sector stood at Dh243.5 billion in 2018, according to the UAE Banks Federation\u2019s recently published annual report. Total domestic credit extended by banks stood at just over Dh1.5 trillion.<\/p>\n
\u201cThere 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],\u201d said Abdul Aziz Al Ghurair, head of the UAE Banks Federation and chairman of Mashreq Bank.<\/p>\n
Mr Al Ghurair made the comments while speaking at FinTech Abu Dhabi yesterday. He also said the proposal on the lending cap is still \u201cin dialogue and could take a few months\u201d.<\/p>\n
\u201cThis is to protect the whole economy and lending. You cannot have all your lending in one sector. If the sector gets affected then the whole banking sector gets affected. This is a prudent decision,\u201d he said, without revealing further details.<\/p>\n
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\u2019s Expo 2020, Abu Dhabi\u2019s Dh50 billion Ghadan 21 stimulus and changes to the emirate\u2019s freehold property law.<\/p>\n
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.<\/p>\n
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.<\/p>\n
\u201cIn Europe, we have negative interest rates \u2013 at least here, we don\u2019t have a lower interest rate \u2026 that does impact banks negatively because we have huge capital, shareholders\u2019 equity as well as huge deposits. The lower interest rates, the less banks will make money,\u201d he said.<\/p>\n","protected":false},"excerpt":{"rendered":"
New measure is to protect the whole economy and banking sector, says Abdul Aziz Al Ghurair, head of the UAE Banks Federation 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 …<\/p>\n