Wednesday, Apr 30, 2014
Abu Dhabi: A member of the Federal National Council questioned the role played by the central bank in monitoring real estate appraisals — written estimates of a property’s market value, based on recent sales information for similar properties, the condition of the property and how the neighbourhood might affect future property value.
Marwan Ahmad Bin Galita, a member from Dubai, said banks and finance houses offered real estate loans in just 30 minutes, asking what sort of standards these banks are following when they offer mortgages to customers.
Bin Galita said there had to be criteria which real estate appraisers must abide by and the central bank must monitor.
Last year, the Central Bank of UAE issued a new set of regulations on mortgage lending, defining the eligibility of various categories of borrowers based on the loan-to-value (LTV) ratio.
In the case of Emiratis, each borrower can seek a loan on only one property under this category. For properties valued at Dh5 million and below, the loan eligibility will be a maximum of 80 per cent. In cases where the property value exceeds Dh5 million, bank financing (LTV) shall not exceed 70 per cent of the value of the property.
If citizens seek loans for a second house or investment property, the loan eligibility is capped at 65 per cent of the value of the property.
Finance risks
In the case of expatriates, the central bank has set the mortgage limit for the first house (for owner occupier) at 75 per cent of the value for properties that are valued less than Dh5 million. If the value of the property is more than Dh5 million, an expatriate borrower can borrow a maximum of 65 per cent of the value of the property.
Obaid Humaid Al Tayer, Minister of State for Financial Affairs, said that the central bank’s panels are working on a set of rules to guard against finance risks and make certain that lending policies and all mortgage terms are met before a loan is given.
Saeed Abdullah Al Hamiz, assistant central bank governor for banking supervision, said real estate appraisers are not licensed by the central bank.
The UAE, like most countries require that appraisals be done by a licensed or certified appraiser, also known as a property valuer or valuation surveyor.
For a second house or investment property, expatriates in the UAE are eligible only for a mortgage up to a maximum of 60 per cent of the value of the property.
Given the long-term nature of the development process and the higher level of risk to completion, the maximum LTV for mortgage on property being purchased off-plan is set at 50 per cent, regardless of the purpose or category of the purchaser.
The maximum limit for a mortgage loan is set at 25 years and the maximum age for the borrower at the time of the last instalment is set at 70 years for Emiratis and 65 years for expatriates.
The central bank also specifies that the debt burden ratio (calculated in total monthly instalments of all debt burden) should not exceed 50 per cent of the monthly income. In addition, the maximum financing amount allowed for Emiratis is set at eight times their annual income and for expatriates at seven times their annual income.
By Samir Salama Associate Editor
Gulf News 2014. All rights reserved.
