UAE proposes new real estate lending rules for banks

Adds details, background

ABU DHABI, Oct 24 (Reuters) - The United Arab Emirates' central bank has proposed new regulatory measures to prevent banks from over-exposure to real estate and to encourage them to maintain diversified assets.

The UAE, home to the world’s tallest tower, the Burj Khalifa, has faced a sharp real estate slowdown due to oversupply and weaker investment appetite amid lower oil prices.

The government is implementing new measures to bolster the real estate sector including stimulus packages and allowing foreigners to own freehold property in Abu Dhabi. Dubai granted freehold ownership in 2002.

The redesigned measures are expected to improve flexibility for bank lending to the real estate sector, the central bank said in a statement.

It will also ensure that banks with higher real estate exposures will be subject to "supplemental regulatory requirements," the statement said, without specifying details on the new measures or lending limits.

Banks are expected to respond to the new proposal by October 31.

The UAE’s bank lobby is proposing limits on bank lending to real estate to protect them from being overexposed to the sector, the head of the UAE Banks Federation said

Real estate and construction accounted for about 20% of gross loans at end of the first quarter, according to central bank data.

Fitch Ratings said in a recent report the true exposure is higher as the data excludes retail mortgage lending and some lending to investment companies that finance development.

(Reporting by Stanley Carvalho Editing by Alexandra Hudson)

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