It was the UAE Central Bank that issued a circular on April 22 calling on banks to consider deferments on personal and auto loans from clients who sustained damages from the rains. Image Credit: AFP

Dubai: UAE residents are starting to receive loan deferment approvals from their banks on claims that they had sustained extensive damage to their assets during the April 16 rains subsequent instances of flooding.

The loan deferments apply to personal loans and on auto loans. Those with mortgage payments are not eligible for deferments.

Banking sources say there had been a rush of loan deferment requests in recent days, with clients sending in pictorial evidence of damages sustained by their vehicles after the deluge. The highest number of claims to date have been for deferring auto loans, bankers add.

The UAE Central Bank had on April 22 issued a note to all banks and insurers to look favourably into all such requests from their clients.

“There will be a further flood of claims once insurers start processing all the requests they have had from clients,” said a banker. “I don’t think insurers have even got to the half-way mark on processing these claims.”

Those claims lacking in evidence showing extent of damages are being rejected. Those residents who have had such rejections from insurers can resort to the ‘Sanadak’ grievance submission platform under the UAE Central Bank.

“Those getting loan deferments for up to six months do not incur any additional fees, interest charges, or an increase on their current principal amount,” said Dhiren Gupta, Managing Director at the consultancy 4C Mortgages.

“When it comes to damages to property, insurance companies have been directed to cover structural damages incurred to the properties - but if the cover comes under comprehensive.”

A win-win on loan deferment?
Those UAE residents getting the deferred 6-month loan deferment potentially stand to benefit more. There is a good chance that interest rates could be in for a cut at some point in the second-half of 2024. If that happens, these residents will likely be charged at the lower rate once they start paying back those loans. Or at least they can hope it will be the case...

Repairs on cars

The six month window on further loan instalments will be quite handy for a sizeable number of UAE residents. Those with damaged vehicles have been getting estimates from their insurers and garages on what it would cost to repair. And for those without comprehensive insurance, the costs are looking quite steep.

"It's like this, anyone without comprehensive will have to dip into their pockets," said an insurer. "Anyone with a vehicle that's more than 3 years' old might have to look at independent garages for the repair works. It will come as being less expensive for them to do so."

Industry sources say that even when the claims are being rejected, customers must try other recourses such as the Sanadak option to get themselves a second chance. (It was this year that the central bank introduced the platform, where customers can place their complaints against insurers and seek a solution from the independent Sanadak panel.)