Real Estate Lending in UAE with Cap Off

  • November 12, 2018

As the news buzzes with the announcement of UAE’s Central Bank lifting the 20 per cent cap on real estate lending as a percentage of the total deposits of banks, one wonders its impact on Dubai’s property market in the short and long run.

Although clear definition of “real estate” is in the works, this removal of the lending cap must be viewed with caution. Looking at the market, increasing the cap blindly across sectors may prove to be detrimental to the economy.

The public, in general, should have access to excellent infrastructure and basic facilities in a sustained fashion. From that viewpoint, amenities such as healthcare and education should gain more focus. For people with families, affordable housing is equally important with free access to public areas.

Complete removal of the 20 per cent cap for all forms of real estate may mean exposure to higher risk for the industry. Instead, focusing on the above mentioned areas – basic amenities across the demography – makes it more meaningful.

It remains to be seen how the banking body and regulators come up with the right definition of “real estate” and loans associated with it. That alone may prove to be crucial in making the cap lifting move a successful growth strategy.

Not having a timeline to the announcement of accurate definition for real estate and associated loans is going to keep mortgage borrowers guessing. If home buyers gain access to a bigger pool of lenders, the residential market of Dubai can hope to see a major revival. With so many houses readily available in good neighborhoods, young families can aspire to see themselves settling in communities built specifically for them.