Credit to property employees cut

Dubai: A number of banks in the UAE have stopped or suspended retail credit facilities to employees of leading Dubai-based real estate companies in the context of restructuring and retrenchments.

According to information made available to Gulf News, Emirates NBD, the region's largest lender has suspended retail credit facilities to expatriate employees working with Tamweel, Amlak, Damac and its subsidiaries, Daman Investments, Emaar, Nakheel, Sama Dubai, Dubai Properties, Union Properties and KM Properties.

"We are keeping a close eye on all real estate, construction, financial services, oil and gas and consultancy services as these sectors are highly prone to restructuring and job losses," said the retail banking head of a local bank.

According to estimates, expatriates working in the UAE remitted more than Dh4 billion over the last two months, taking advantage of exchange rate and interest rate arbitrage from the rising dollar. Most of this money came from personal loans.

Minimum raised

A number of banking industry sources confirmed to Gulf News that there has been a big surge in demand for personal loans during the last quarter. But most banks are forced to restrict lending as they fear future defaults.

Emirates NBD has raised its minimum salary requirement from Dh3,000 to Dh5,000 while it has substantially reduced the loan multiples for personal loans across the board. In vehicle finance and mortgages banks are now demanding down payments in the range of 20 to 50 per cent.

Lloyds TSB has stopped loans for the purchase of apartments, while it dropped its loan-to-value ratio on villas to 50 per cent.

"Due to exceptional global market conditions, Lloyds TSB Middle East has altered some aspects of its mortgage product offering. Lloyds TSB is not currently lending to customers who wish to purchase apartments," the bank said in a statement. In the beginning the bank was lending a maximum of 80 per cent against villas and 70 per cent against apartments in the UAE.

Earlier this week HSBC doubled its minimum salary requirement for a personal loan from Dh10,000 to Dh20,000.

"Our new credit eligibility criteria will ensure that customers receive loans that they can afford to repay at a time of considerable uncertainty around the world," HSBC said in an emailed statement.

While the global credit crunch almost shut local banks' access to the international bond markets, outflow of from the banking system as the dirham lost its speculative charm precipitated a major funding squeeze, leading to significant pressure on lending.

Although the UAE government has pledged Dh120 billion to the banking sector and guaranteed all interbank liabilities, in the context of falling asset prices and potential retrenchments, banks have turned cautious.

See also Pages 38-42