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The Central Bank of the UAE has implemented an expanded regulatory framework to oversee the activities of banks in the country's real estate sector. The new standards cover all types of balance sheet loans and investments, as well as off-balance sheet risks in the real estate sector.
The new system will come into force on December 30, 2021 and will begin with a one-year observation period during which banks will have to improve its practices in accordance with the new rules. According to the statement, the Central Bank will evaluate these standards on the basis of a supervisory review during the observation period.
The main objective is for UAE banks to review and improve their internal policies for the reliability of underwriting, valuation and overall risk management related to their real estate.
According to the Central Bank's forecast for the second quarter, the UAE economy will grow by 2.1% this year due to measures to mitigate the effects of the pandemic, such as the accelerated vaccination program against COVID-19. The economy is expected to grow by 4.2% in 2022, which is higher than the previous forecast of 3.8%.
Relief measures related to bank capital reserves, liquidity requirements and stable financing will be extended until the end of June next year for all lenders operating in the UAE. These measures are part of the targeted economic support program, which was introduced at the beginning of the pandemic in 2020.
