E-Paper
Sign In
UAE banks to stay resilient despite real estate slowdown, says report
Although banks in the country are exposed to the real estate sector through corporate lending and mortgages, regulatory measures have helped contain risks
- PUBLISHED: Mon 16 Feb 2026, 12:42 PM UPDATED: Mon 16 Feb 2026, 2:07 PM
Banks in the UAE are set to remain resilient even as the property market gradually cools over the next 12 to 18 months ,following half a decade of strong growth, according to Moody’s Ratings. Regulatory caps on real estate exposure, strong capital buffers , and solid liquidity are likely to protect lenders' asset quality in the event of a downturn.
Although the UAE banks are exposed to the real estate sector through corporate lending and mortgages, regulatory measures have helped contain risks, according to the ratings agency. In 2022, the Central Bank of the UAE (CBUAE) capped exposure to construction and real estate at 30 per cent of credit risk-weighted assets. In the first half of 2025, aggregate exposure stood at around 18.3 per cent, giving banks the capacity to increasing financing to the real estate sector.
Recommended For You
Additionally, other factors have also contributed to a declining trend in the banks’ lending book, including strong liquidity in the economy, early repayment from the companies, and a period of high interest rates.
Stay up to date with the latest news. Follow KT on WhatsApp Channels
Real estate and construction lending fell by 6 per cent in 2022, 4 per cent in 2023 and 8 per cent in 2024, before rising 4 per cent year on year as of September 2025 — largely due to declining interest rates. The sector now accounts for 12 per cent of total loans, down from 19 per cent in December 2021.
Meanwhile, personal loans for consumption grew around 18 per cent year on year as of December 2024 and September 2025, representing 23 per cent of total gross loans. These loans include mortgages and therefore still reflect exposure to the property market. Mortgage lending has surpassed pre pandemic levels amid strong real estate activity, although most transactions continue to be completed in cash rather than through bank financing.
Developers have increasingly diversified funding sources and moved away from project specific secured bank loans. Since 2023, they have issued close to $12 billion in sukuk, bonds and hybrid debt, with maturities averaging around $2 billion annually between 2027 and 2030.
Stronger capital buffers
As monetary policy eases, net interest margins are likely to face further pressure because asset yields may decline faster than funding costs. However, solid non-interest income and cost discipline are expected to partially offset this impact. Higher provisioning charges, following a period of strong recoveries, are likely to temper returns on assets from the record high of 1.9 per cent recorded between December 2023 and June 2025, while keeping overall profitability at solid levels.
UAE banks have strengthened capital buffers since the 2008 to 2009 financial crisis, alongside robust liquidity. Core banking liquidity stood at 23 per cent of total assets in June 2025. The nonperforming loan ratio halved in recent years to a record low of 2.9 per cent as of June 2025, supported by recoveries, write offs and improved risk management. Provisions remain well above 100 per cent coverage, offering an additional safeguard against a potential softening in the real estate market.
Hind Aldah is a business reporter based in Sharjah. In her spare time, you will find her playing classical guitar, painting amateur oil paintings, or crocheting the same old scarf that leads nowhere.
