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ABU DHABI, Oct 22 (Reuters) - The United Arab Emirates’ bank lobby is proposing limits on bank lending to the real estate sector to protect them from being overexposed to the sector, a senior bank executive said on Tuesday.
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.
“There is a draft paper for real estate lending with the UAE Banks Federation (UBF) and the banking sector which will review and give feedback to have a proper policy in lending cap for the real estate sector,” said Abdul Aziz al-Ghurair, head of the United Arab Emirates Banks Federation, on the sidelines of a conference.
“This is to protect the whole economy, you can’t have all your lending in one sector. If the sector is impacted, the whole banking industry gets impacted, this is a prudent decision.”
He did not provide additional details on the limits the proposal sought to impose.
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.
Ghurair, who is also chairman of Mashreqbank, said his bank and the banking industry was witnessing flat loan growth.
“Loan growth is flat almost for the whole sector, for Mashreq and for everybody,” he told reporters at a Fintech event in Abu Dhabi.
He said lower interest rates were hurting banks because “we have huge capital, shareholders equity and huge deposits.” (Reporting by Stanley Carvalho, writing by Saeed Azhar, editing by Deepa Babington)