New figures that have just been released suggest that the number of loan reschedules and foreclosures will decrease somewhat over the coming months. Many mortgage lenders in the UAE are predicting that non-performing loans will start to ease off although recent statistics released by the Central Bank show that Banks have increased their provisions for bad debts being incurred from outstanding loans.
However Emirates Business have also said that they feel the situation will improve and the sector will see less foreclosures and Banks will once again be in a better position to increase its loan capacities.
Central Bank statistics indicate that there was an increase in bad debt provisions up until the end of March last but they predict much lower figures for the remainder of the year. The outlook for the property sector is still more uncertain but the reduction in foreclosures and the increased flexibility of the Banking sector indicates that there will be a sizeable reduction in the number of loan defaults this year. Banks are now giving their clients more leeway when their customers come to them and explain that they may be out of work for a few months and together the Bank and the client work out a new payment plan to reduce payments for a while until the customer finds a new job.
In the UAE it is a criminal offence to default on a loan repayment and this can result in a fine of up to Dh1,000 or a jail term but Financial Institutions are now realizing that using this law can be ineffective when the customer simply does not have the money to pay and it will just make repayment impossible if that customer goes to jail.Paul Holdsworth, Staff Writer, Gulf Jobs Market News