UAE bank loans to real estate developers are within limits and most of them are backed by strong collateral, according to economists and industry experts.

They feel that the country’s banks would not be affected by a credit crunch such as the US subprime mortgage crisis, according to a report in the Gulf News.

They were reacting to comments by the Abu Dhabi Chamber of Commerce and Industry (ADCCI) which had said, ’Banks and other institutions should exercise utmost care and derive lessons from what happened in the US, where major financial institutions reeled under heavy losses.’

As per the UAE Central Bank rules, banks have to adhere to a maximum limit of 20 per cent for real estate loans and creditsm, the report said.

A possible slow down in the real estate sector, an expected rise in funding for projects and lack of proper legislation to regulate mortgages are some of the challenges facing banks, said the ADCCI.