Mortgage lending plan goes to UAE central bank

Updated 07 February 2013
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Mortgage lending plan goes to UAE central bank

ABU DHABI: Banks in the UAE have proposed amendments to rules capping mortgage lending which aim to prevent bubbles from forming in the real estate sector, a banking industry body said.
Real estate prices in the UAE, particularly in Dubai and Abu Dhabi, collapsed after the bursting of a bubble in 2008, with prices falling more than 50 percent from their peaks.
At the end of last December the central bank unveiled limits on residential mortgage lending. The announcement caused a furore in the industry as many bankers felt the curbs would stymie a nascent recovery in property prices, and complained that the rules were introduced without warning — though the central bank subsequently said they were merely a starting point for discussion.
The Emirates Banks Association said in a statement that it had submitted a unified proposal to the central bank on Monday following discussions with member banks.
Proposals relating to loan-to-value (LTV) ratios were in line with those outlined by EBA chairman Abdulaziz Al-Ghurair last month; the EBA wants lending for first homes capped at 80 percent for UAE nationals and 75 percent for expatriates.
The LTV for subsequent homes would be 65 percent for UAE nationals and 60 percent for expatriates.
The original central bank circular had said mortgage loans for foreign individuals should not exceed 50 percent for first homes and 40 percent for subsequent ones, with the caps for UAE citizens set at 70 percent and 60 percent.
The EBA also made proposals this week relating to maximum financing, which would be limited to eight years' salary or total income for citizens and seven years for expatriates, as well as length of mortgages, which would be capped at 25 years.
Other areas addressed included making repayments directly linked to salary or other verifiable regular sources of income but excluding end-of-service benefits, as well as collateral, interest and fees.
The central bank said recently that it now planned to introduce new rules for the mortgage industry in about six to nine months.


Saudi insurance stocks soar as female drivers take to the road

Saudi Majdoleen Mohammed Alateeq, a newly licensed Saudi driver, gets out of her car in Riyadh on Sunday. The insurance sector is just one segment of the economy set to benefit from the lifting of restrictions on women drivers in the Kingdom. AFP
Updated 25 June 2018
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Saudi insurance stocks soar as female drivers take to the road

LONDON: Saudi insurance stocks surged on Sunday, with investors expecting the sector to reap significant dividends following the lifting of the ban on female drivers.
Insurance stocks — one of the worst performing sectors on the Saudi bourse for the year to date — outperformed other classifications on Sunday, ending 2.4 percent higher, compared with a 1.8 percent rise for the Kingdom’s headline index.
Amana Insurance and AlRajhi Takaful were the best performers of the day, gaining 9.9 percent each. Tawuniya, the Kingdom’s largest insurer, ended Sunday 1.1 percent higher, with only one of the country’s 33 listed insurance providers closing lower for the day.
The lifting of restrictions on female drivers — which came into effect on Sunday after first being announced in September — is part of a series of wide-ranging reforms introduced as part of Saudi Arabia’s Vision 2030 economic transformation program, designed to diversify the economy away from a reliance on oil revenues.
The advent of women drivers is forecast to benefit the economy by significantly increase female participation in the workforce, and stimulating financial, insurance and retail sectors among others.
The insurance sector is set to draw particular benefit from the move, but may remain under pressure, according to rating agency S&P.
“We anticipate that efforts of the local authorities to tackle the large number of uninsured drivers, combined with the arrival of women drivers … and the introduction of additional benefits under the unified medical policy from July 1, will support further premium growth in the industry in the medium term,” said S&P in a research note in April.
“However, these factors may be offset by the large number of foreign workers that have already left or will be leaving the Kingdom in 2018.”
In spite of yesterday’s price surge, insurance stocks are 8.4 percent lower for the year to date. Tadawul as a whole is up 15.6 percent so far this year, making the bourse one of the world’s best performers for 2018.
Investor sentiment on Sunday was also boosted by investor optimism after index provider MSCI announced last week that it would upgrade Saudi stocks to its Emerging Markets Index from next year.
The widely anticipated upgrade — which puts Saudi equities on an index tracked by around $2 trillion worth of global assets — is expected to attract up to $40 billion of international funds, Tadawul CEO Khalid Al-Hussan told Arab News last week.
MSCI’s upgrade came after a similar move by fellow index provider FTSE Russell in February, which is also scheduled to come into effect from next year.
Banks were among the other bright performers on Tadawul on Sunday. Arab National Bank led gains, closing up 4.2 percent, while blue-chip names NCB and AlRajhi rose 1.6 percent and 2.3 percent respectively.
Some petrochemical companies also added value, Reuters reported, following a rise in oil prices after OPEC decided on only modest increases in crude production last week.
Outside Saudi Arabia, Gulf markets posted minor gains. In Dubai, where the index was flat, Air Arabia was unchanged. Shares in the airline have declined by more than 10 percent since early last week, when the company said it had hired experts to protect its business interests in private equity firm Abraaj, which has filed for provisional liquidation. The airline said its exposure was around $336 million.
Last week, the UAE’s securities regulator asked listed companies to declare their exposure to Abraaj.