x Abu Dhabi, UAEMonday 24 July 2017

UAE Central Bank confirms mortgage cap rules in bid to cool property prices

Expatriates will be restricted to 75 per cent of a property’s value for a first investment of less than Dh5 million, while UAE nationals will be restricted to 80 per cent.

Banks have long been expecting the mortgage regulations after the Central Bank first attempted to introduce caps in the UAE. Pawan Singh / The National
Banks have long been expecting the mortgage regulations after the Central Bank first attempted to introduce caps in the UAE. Pawan Singh / The National

The Cental Bank has finally issued long awaited regulations restricting the amount of cash that homebuyers can borrow in an attempt to cool rampant property price rises.

The new rules will restrict home loans to expatriates to 75 per cent of a property’s value for a first investment of less than Dh5 million. Home loans to UAE nationals will be restricted to 80 per cent of a property’s value for homes worth less than Dh5 million.

The rules which were circulated by the bank on Monday will come into force a month after they are published in the Official Gazette, a statement said.

For homes worth more than Dh5 million, first time buyer expatriates will be restricted to being able to borrow 65 per cent of the property’s value while for UAE nationals the cap will be 70 per cent.

For second and subsequent property purchases, expatriates will only be able to borrow 60 per cent of a property’s value regardless of cost and UAE nationals will be able to borrow 65 per cent.

For off plan property, the banks says that all customers will only be able to borrow 50 per cent of the value of the property regardless of purpose, value or nationality.

Loan lengths are limited to a maximum of 25 years and the maximum age at the time of the last repayment is 65 for expatriates and 70 for UAE nationals.

Banks have also been told not to lend customers more than 50 per cent of their monthly incomes and the bank has set limits of eight years annual income for UAE nationals and up to seven years annual income for expatriates.

“The Central Bank is seeking to ensure that banks and other financial institutions have and maintain effective business standards and control frameworks in place for the granting of mortgage loans,” Sultan Bin Nasser Al Suwaidi, the bank governor said in the statement.

Banks have long been expecting the new regulations which come ten months after the Central Bank first attempted to introduce mortgage caps in the UAE.

An original cap proposal, limiting loans to first-time foreign buyers to 50 per cent of the property’s value and 70 per cent for locals, was announced in December, prompting an outcry from commercial banks and precipitating news of a temporary slowdown in the Dubai property market.

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lbarnard@thenational.ae

jeverington@thenational.ae