UAE shares drop on real estate fears

Dubai: UAE shares fell on Thursday after mortgage lender Amlak Finance PJSC said it isn't granting new home loans, further undermining investor confidence in the region's real estate market.

Amlak dropped as much as 9.3 per cent after the UAE's biggest mortgage lender said it temporarily stopped granting new mortgages. Emaar Properties PJSC fell for a third day this week and Sorouh Real Estate Co. declined for the first time in five days.

The Dubai Financial Market General Index fell two per cent to 2,012.24, bringing the decline for the week to 4.5 per cent. The Abu Dhabi Securities Exchange General Index lost 1.6 per cent.

"Low investor confidence can be directly linked to the fall in the real estate market," said Motaz Herzallah, senior broker at Emirates Securities LLC in Abu Dhabi.

Amlak's news came after other banks took steps to restrict mortgage-lending as the global credit crisis threatens Dubai's property boom and pushes mortgage providers to restructure. HSBC Holdings Plc and Lloyds TSB Group Plc, two of the largest UK banks operating in the UAE, earlier this month said they would tighten mortgage lending criteria in the country.

Amlak fell 5.6 per cent to Dh1.02, after dropping to Dh0.98 in intraday trading. Tamweel, the country's second-largest mortgage provider, lost 5.7 per cent to Dh0.99, the lowest close since listing shares in 2006.

Amlak hasn't stopped facilitating home purchases and "our temporary measures of not sourcing new applications will bring us up to the level we have outlined in our management strategy at the beginning of the year," Chief Executive Officer Arif Al Harmi said on Wednesday.

Amlak and Tamweel's "business plans are not sustainable and have to be changed," Nasser Bin Hassan Al Shaikh, Amlak chairman, said on Wednesday.

"These companies need to have access to retail deposits. They don't have to become banks but something similar to the savings and loans model in other countries."