The Central Bank of the United Arab Emirates (UAE) has approved regulations allowing banks to set up real estate subsidiaries, local newspaper Gulf News reported on Tuesday.

According to the new regulations, banks are now allowed to finance and manage real estate projects through joint venture subsidiaries, 60 percent stake of which is to be held by the general shareholders, the report said.

The subsidiaries are entitled to purchase, sale and develop projects, in addition to financing and managing them, the report added.

"The new regulations will allow much needed strategic partnerships with the banks, encouraging and inducing more investments in the sector," Saleh Bin Nasrah, chairman of Al Shorfa Real Estate Investments, was quoted as saying.

The UAE banks' direct exposure to the real estate sector such as providing mortgages stands at about five percent of their total loans so far, while their indirect exposure through real estate project financing constitutes about 12 percent of the loans.

"Clearly, anything giving the banks more potential to finance real estate will boost the sector. However, according to remarks by external institutions such as the IMF, banks do not need to rush heavily into one specific sector," a senior official with the National Bank of Abu Dhabi was quoted as saying.

Source: Xinhua