* Economy minister says has reduced Amlak's debt by $1.1 bln
* Resumption of trading, halted since 2008, to take more time (Adds details, quotes)
DUBAI, March 20 (Reuters) - The federal government has cut struggling Islamic lender Amlak's debt burden by $1.1 billion, the UAE economy minister said on Tuesday, in the latest effort to revive the Dubai mortgage provider whose stock has been halted since 2008.
The move could give Dubai's battered property sector a boost as the federal government helps clean up the damage from Dubai's 2009 real estate bust.
Amlak, which is 45-percent-owned by Dubai's largest real estate firm Emaar Properties, was one of the highest profile victims of Dubai's extravagant construction boom which abruptly ended after the global financial crisis in 2008.
UAE Economy Minister Sultan bin Saeed al-Mansouri said a committee had "succeeded in reducing by some 4 billion dirhams ($1.1 billion) of total debt owed by the firm and this in coordination with the federal government and the local parties concerned," according to a statement on the ministry's website.
Amlak's total liabilities stood at 11.01 billion dirhams as of Sept. 30, 2011, according to its earnings report on the Dubai Financial Market.
In November 2008, the UAE government unveiled plans to merge Amlak with rival Dubai mortgage lender Tamweel after the two firms were hard hit by the emirate's real estate collapse.
That plan was effectively ruled out after lender Dubai Islamic Bank raised its stake in Tamweel to 57.33 percent in September 2010, effectively rendering the mortgage lender a subsidiary of the bank.
On Tuesday, Mansouri said resuming trade in Amlak stock will take more time.
"The commission is keen to protect the rights of shareholders and the continuity of the company, while not exposing them to bankruptcy," Mansouri said.
"The government will not allow bankruptcies of companies, as happened in many European countries and the United States, and the country is keen to give priority to the protection of the shareholders' rights and their interests and not expose to any risk."
Dubai has not yet recovered from property market collapse that followed the global financial crisis in 2008.
The four-year decline in house prices won't end this year, as oversupply weigh on the market. House prices in Dubai are expected to drop another 5 percent this year, a Reuters poll showed.
Property firms have been forced to cancel projects and restructure their huge pile of debt with the help of the government.
Shares of Emaar were flat on the Dubai bourse at 0630 GMT. ($1 = 3.6730 UAE dirhams) (Reporting by Martina Fuchs and Praveen Menon; Editing by Amran Abocar)