Tightening credit in the Middle East may bring new layoffs and more instability in the property market—particularly n Dubai. For more information, read the following article from Property Wire.
Middle East banks are set to tighten their lending rules further in what is seen as another blow to the property sector.
It is a growing risk of default that has prompted the move and banks in the United Arab Emirates say they have no option but to tighten credit to salaried customers.
They are also cautious about retail lending due to tight liquidity and the growing prospect of job losses in the private sector.
"Several of our customers have extremely good credit histories. However, we are forced to make our loan criteria stringent to avoid any difficulties for our customers due to the current financial situation," said an official with Emirates NBD, the region's largest lender.
The bank recently revised its minimum salary requirement for personal loans for expatriate salaried employees twice from Dh2,500 to Dh5,000 in early November and to Dh10,000 late last week.
The UAE Central Bank has predicted that credit growth will shrink from close to 50 percent in the first half of this year to less than 10 percent in 2009.
Several banks have either suspended or stopped loans to construction and real estate companies. "Clearly there is a sector bias against real estate, construction and the hospitality sector in our lending operations as these sectors are likely to have maximum job losses," said one official of a leading foreign bank operating in the country.
"Today job losses are a reality we all have to deal with. Considering the large number of expatriates employed in the UAE, it is in the interests of both banks and their customers to reduce lending until the situation improves," he added.
Last month, Lloyds TSB stopped loans for the purchase of apartments and it dropped its loan-to-value ratio on villas to 50 percent. HSBC doubled its minimum salary requirement for a personal loan from Dh10,000 to Dh20,000.
Several foreign and local banks have also stopped retail products such as salary overdrafts, loan installment deferrals, student loans, pre-approved cash advances and pre-approved credit cards.
This article has been reposted from Property Wire. View the article on Property Wire's international real estate news website here.
