MAG Group CEO says banks must start lending

MAG Group Property Development CEO Mohammed Nimer

The boss of a top UAE developer has made an impassioned call for banks to relax their lending criteria for prospective mid-range home owners to “get the economy moving again.”

The comments were made by MAG Group Property Development CEO Mohammed Nimer, in reaction to a snap survey carried out on behalf of the firm.

Such a move would spell relief for sections of the construction industry, with many developers already being forced to relax terms of payment for existing clients unsettled by the lack of liquidity in the market.

“In most cases a minimum of 50% of the purchase price is required, which means a prospective buyer needs to find in excess of one million dirhams in cash as a deposit, which is a virtual impossibility for most,” Nimer said.

The construction industry has stalled in many parts of the country, with an ever increasing number of projects being placed on-hold or cancelled due to the inability of would-be buyers to qualify for mortgages.

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The resumption of lending on the part of banks would bring to an end the arid liquidity situation, allowing many developers to push on with stalled projects.

MAG Group said that the survey it commissioned, “underlined the problem caused by restricting credit to potential home-owners revealing that in some cases it would be cheaper to buy than rent property.”

“These aspiring home owners constitute thousands of white collar workers in both public and private sectors,” Nimer said.

“If they feel that they don’t have a long-term future in the country, they may well not be around when the upturn arrives.”

Nimer added that the recent correction in the real estate market should have spurred a relaxation of lending rules.

“The problem is that most of the main mortgage providers are demanding excessive deposits up front even though property prices have softened considerably already,” he said.

“My message to them is quite simple. You have sufficient capital, so start lending to prospective home owners and get the real estate market, not to mention the wider economy, moving again.”
 

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