The recent announcements by the UAE Central Bank, introducing packages aimed at stimulating the economy, will benefit the real estate sector significantly, according to Abdulla bin Sulayem, CEO of UAE-headquartered upscale residential, hospitality and commercial property development company Seven Tides.
In total, the central bank has now pledged AED 256 billion to stimulate the economy and mitigate the economic impact that the COVID-19 outbreak is having on the UAE.
However, in its most recent move, the central bank has also reduced the reserve requirements for demand deposits for UAE banks, by half, from 14% to just 7%, which will pump an additional AED 61 billion into the financial system, improving liquidity and underpinning the banks’ ability to extend their lending further still.
As previously announced, banks will also have access to a AED 50 billion fund, offering capital at zero interest to help them extend more finance to the market. This will also enable banks to offer relief to existing borrowers by deferring principal and interest payments, until December 31, 2020.
“The increased liquidity, will also enable banks to offer and compete for new loans and mortgages in the market, as well as supporting their existing customers. It is crucial for the real estate sector that developers and investors have continued access to funding,” says Bin Sulayem.
Furthermore, in terms of funding, banks will now be allowed to increase their exposure to the real estate sector from 20% to 30%, with banks being required to hold additional capital if they surpass the 20% exposure threshold. Again, this will provide additional liquidity for both real estate developers and investors.