UAE Central Bank to relax cap on bank lending to real estate sector

• UAE banks can currently lend as much as 20% of customer deposits to the real estate industry 
• Banks can choose to lend beyond the cap but that would incur a capital charge

The Central Bank of the UAE is working to ease the rules regarding the cap on lending to the real estate sector, said the bank’s chief at an event in Abu Dhabi.

Speaking at the Middle East Banking Forum, Mubarak Rashid Al Mansoori, governor of the Central Bank of the UAE, confirmed the removal of the 20% property lending cap and said the new policy would allow more flexibility for banks and the property sector. UAE banks can currently lend as much as 20% of customer deposits to the real estate industry. 

Banks can choose to lend beyond the 20% cap but that would incur a capital charge, so lenders will need to determine the risk-return profile of any such decision, the governor said.

“If a bank wants to lend higher than the minimum cap there is [still] a higher overreaching cap they cannot [exceed] even if they want,” Al Mansoori added, explaining that a cap would still be maintained even if banks exceed the 20% level.

According to the UAE Banks Federation’s annual report published recently, lending to the residential real estate sector stood at AED 243.5 billion in 2018.

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