What kind of property do you want to buy in Dubai?
The first step to purchasing any property is to establish exactly what you want in the vast UAE real estate market. Why are you buying property in Dubai, where do you want to live and how much house can you actually afford? You need to ask yourself these and other pertinent questions such as do you want a studio, villa or an apartment? Can you stand the risk of an off-plan or would you prefer a secondary purchase? And what neighborhood would you prefer? Factors such as your budget, house features, traffic and accessibility, proximity to schools and your workplace, available social amenities should guide you in answering these questions.
How much can you afford to pay for property in Dubai
Once you decide on the property you want, you should prepare a budget based on your income and needs. Majority of expats in Dubai use mortgage facilities and have access to many credit options including banks and private lenders.
Property mortgages differ depending on your nationality and the type of property you want to buy as well as your income. The amount of loan you can borrow is also pegged to the value of the property.
- UAE citizens. UAE nationals purchasing their first property must have a downpayment of 20% because the laws stipulate that they can only access up to 80% loan to a value of Dh.5 million property. If they choose to buy property of higher value they will have a limit of 75% loan access while any second and subsequent property purchases will be limited to 65% mortgage.
- Non-UAE citizens. Whether you are a UAE resident or not, you must set aside a 25% down payment because your mortgage is limited to 75% of the purchase price for property valued at Dh.5 million. If the property you want to buy is worth more than Dh.5 million, you will need a 40% deposit because your lender can only give you 60% loan in such a case. Just like the UAE nationals, only 60% mortgage will be offered for any subsequent properties purchased, value notwithstanding,
- Off-plan property buyers. Regardless of nationality, all off-plan property buyers in Dubai are required to pay the first 50% as down payment because lenders restrict loans for such properties to 50% maximum of the value of the property. This is mainly because of the risk associated with off-plan properties.
This means that you must start saving up for your home downpayment long before you even begin the search for property in the UAE. It is illegal for borrowers and lenders to obtain down payment through personal loans because these tend to carry much higher interest rates than mortgages. Even though interest rates tend to vary from bank to bank, the interest rates for first properties tend to be higher than those of subsequent properties.
The bank might require you to open a bank account with them and give undated security cheques which will be used in the unfortunate event that you default on the loan. If you are a non-resident you might have to show your credit report before you are given a mortgage in the UAE. Ultimately, all mortgages in the UAE must be repaid within 25 years but subject to the terms and conditions of your loan, you might be allowed to pay off your loan earlier. Nonetheless, UAE laws stipulate that you must be below 65 years of age when you pay your last installment and banks therefore consider this when determining the repayment terms
Besides the actual cost of buying your house, there are many other hidden expenses that you ought to budget for. You must pay an administration fee plus a transfer fees of 4% of the transactional price to the Dubai Land Department (DLD). If you borrow from the bank, you also have to pay a 1% lender’s fee, valuation fees, No Objection Certificate charges and other miscellaneous fees. This is in addition to the professional fees that you must pay to brokers, lawyers and agents that you hire to help you with your home search. If you are purchasing a brand new home, you might also have to pay the DLD a land registration fee of 2% of the total property value. All these hidden charges can add up to 10% of the total cost of your home and you can learn more about these expenses from our blog post on financing your home in Dubai. It is strongly advisable to get the mortgage first before you dive into the property market because once you have the money, finding a house will be easy.
Property Listings and Agents in Dubai
Once you have your finances sorted, you can search through our property listings to find the property that meets your checklist. You are bound to find various properties and compare different residential communities according to your budget and preferences. For instance, while Dh.1.5 million can fetch you a big 4 bedroom villa in international city, the same amount might barely afford you a 2 bedroom apartment in Dubai Marina.
Not only will you get a wide variety of studios, apartments and villas for sale in Dubai, but also access experienced property agents who can help you get the right house for the right price. Even though hiring an agent will cost you 2-5% of the total cost of the property, it will ease and speed up your search.
When hiring agents to help you find property for sale in Dubai, be sure to check whether they are registered with the UAE property regulatory body, Real Estate Regulatory Agency (RERA) so as to avoid any scammers. In addition, you must conduct a background check on the agent and where possible, speak to former clients to gauge if the agent is capable of finding you the property of your dreams in Dubai. You can also read through our blog to get information on which communities are experiencing a drop in property prices and get tips on how to bring down property prices in Dubai.
Consider the rules and regulations of property sale in Dubai
Up until 2001, foreigners were not allowed to own property in the UAE. However, this changed and foreigners now have the option of buying property either through freehold or leasehold arrangements. Although the rules and regulations affecting property transactions tend to change frequently, there are a few basic rules and regulations that have remained over time.
- Visa and Residency. There are two types of visas that can be granted to property buyers in Dubai. The property investor permit iis a two year renewable permit, issued by the Dubai Land Department. Visa holders of the Property Investor Visas must possess property worth at least Dh.1 million in a freehold area. Holders of the Property Investor Visa must pay approximately Dh.20000 for this visa and are given an Emirates ID and can obtain a driver’s license in the UAE and also sponsor their families. However, Property Investor Visa holders and their sponsored families are not permitted to work in the UAE because proof of sustainable income is a prerequisite to receiving this visa.
In addition to this, the immigration authority issues a six month visa to property investors. At Dh.4000 this costs much cheaper than the Property Investor Permit issued by DLD and is similar to a tourist visa that allows you multiple entry into the UAE for six months. The main advantage of this visa is that it can be used by investors who own property within any of the 7 emirates in the UAE.
- Breach of contracts. UAE recently revised the laws covering the breach of contacts in order to protect both investors and property sellers. Supposing a house seller or developer fails to oblige to the property sales agreement due to cancellation of the building project by the Real Estate Regulatory Authority (RERA), the law states that the developer must refund the buyer all the payments made, taking into consideration the regulations covering escrow accounts for real estate development in Dubai. However, if the developer fails to deliver the property to the buyer for reasons beyond their control and without any negligence, the law permits them to cancel the sale contract solely. If they do this they must refund the buyer, deducting a maximum of 30% of the moneys paid. This should be done as soon as possible or within 60 days after resale of the property.
On the other hand, if you fail to meet your contractual obligation as a buyer of a property in Dubai, you can discuss this with your developer and come to an amicable agreement with him. If everything else fails, the developer will report this to the DLD and they will issue the buyer with an official statement specifying the fulfilled legal obligations by the developer and how far the construction has progressed. At this stage, if the developer has completed more than 80% of the construction, he have the option of selling the property and claiming payment of any balance from the buyer or requesting DLD to undertake a public auction to sell the property and charge the buyer all the costs related to the auction. Alternatively, the developer can terminate the agreement and retain a maximum of 40% of the purchase price and refund the balance to the buyer within one year from the date of termination. If he chooses to sell the property, the refund should be given within 60 days from the resale date.
Property transfer process in the UAE
Once you have found the property, negotiated and agreed on the terms, you are required to pay a refundable 10% deposit to the seller. This reservation deposit might also go up to 50% if you are buying an off-plan property. The moment you pay up for the deposit you will be issued with a Memorandum of Understanding (MOU) that stipulates the terms and conditions of the transaction and binds you to the contract. Failure to abide by the stipulations of the MOU, you will lose your deposit.
The transfer process will involve a series of checks to ascertain that the land does not have any outstanding lien or service and maintenance charges and to this end, you must obtain a No Objection Certificate from the developer. You must book an appointment for the final exchange which can only be done at the Transfer Centre of the Lands Department and in the presence of all parties involved.