UAE Central Bank eases regulations for Sheikh Zayed Housing Programme beneficiaries

Banks in the UAE have been instructed to increase the debt burden ratio to 60% from 50% to allow more borrowers to obtain loans

The Central Bank has instructed banks to increase the debt burden ratio for retirees and senior UAE nationals to 50 per cent under the Sheikh Zayed Housing Programme. Photo: Central Bank of the UAE

The Central Bank of the UAE has increased the debt burden ratio (DBR) of beneficiaries of housing loans under the Sheikh Zayed Housing Programme (SZHP), that will allow more borrowers to obtain financing, it said on Sunday.

The DBR has been raised to a maximum of 60 per cent from 50 per cent, the banking regulator said in a statement. It has issued a notice to all banks and finance companies operating in the UAE about the change in regulation.

The DBR is the ratio of an individual’s monthly outgoing payments (including instalments towards loans and credit cards) to the borrower’s total income. This number is used by banks to calculate eligibility for loans and credit cards.

Banks have also been instructed to increase the DBR for retirees and senior UAE nationals to 50 per cent from 30 per cent to help them benefit from SZHP loans, after ascertaining their ability to repay the amount, the Central Bank said.

Beneficiaries will need to provide a no-objection statement to increase the monthly deductions against the housing loan.

Meanwhile, UAE nationals with long-term loans will also be provided with the flexibility to obtain SZHP housing loans after ascertaining their ability to pay within the DBR limit of 60 per cent, the regulator said.

Set up in 1999, SZHP provides low-income Emiratis with interest-free loans that are repayable over a 25-year period. Priority is given to widows, senior Emiratis and people with disabilities.

The scheme was introduced to ensure all Emiratis have access to safe and affordable housing and basic services.

As per the latest decision, SZHP housing loan borrowers’ contribution of 15 per cent to the down payment, to ensure that their profit or interest is guaranteed and paid by the federal government, has also been cancelled.

It is, however, subject to certain conditions.

Firstly, the property to be constructed or purchased through financing must be the borrower's first and should be used as a personal residence.

Secondly, if the amount of the loan exceeds the amount of profit or interest guaranteed and paid by the federal government, the UAE national shall be required to pay — without borrowing — the difference in the payable ratio of the down payment of 15 per cent required, the regulator said.

“The Central Bank is keen to support the UAE government’s efforts to achieve happiness, housing stability and provide comfort and well being for its people, in light of the new policy for federal government housing loans that was approved by the Cabinet to provide financing for housing loans in partnership with the private sector and national banks," it said.

"This will reduce the waiting period for housing applications."

The government has taken a number of measures to improve the living conditions of Emiratis. Earlier this month, President Sheikh Mohamed ordered the distribution of Dh1.5 billion ($410 million) of housing benefits to Abu Dhabi citizens coinciding with the Eid Al Adha celebrations.

The payout, which is expected to benefit more than 1,100 Emiratis, includes grants for home loans and exemptions from loan repayments.

A Dh28bn social support package was also announced to provide lower-income Emirati families with subsidies to pay for essentials including fuel, food and utilities.

UAE citizens working in the government sector were also given paid leave at half of their salary to start their own business under a plan unveiled in July.