Buying a property in Dubai

Points to remember when buying house in Dubai

As Dubai’s residential property market seems to be looking up once again, many who were earlier sitting on the sidelines are now actively contemplating buying a place in the city. Experts believe that any money put into the market now will see healthy returns in the future but there remain certain factors to consider before people put in their lives savings into buying a house.

A lot needs to be researched when buying property, especially when it comes to your entitlements. Before deciding to invest in a property, it is important to understand the difference between freehold and leasehold property and the rights and responsibilities owning a freehold property give you, before you take the step to buy it .Owning freehold is usually much better than leasing for one main reason: control. As the owner, you can generally do what you want with your home provided you keep within the rules and the law. In 2001, the Dubai government agreed to allow expats to have a 99-year lease of particular Dubai property, but in May 2002, His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President & Prime Minister of the UAE and Ruler of Dubai issued a decree allowing foreigners to buy property on freehold ownership. The decree sparked the real estate boom in Dubai’s residential property. The Dubai system offers freehold to owners of all nationalities, but in the case of high-rise and multiple occupancy buildings exactly what that means in terms of legal title has yet to be completely defined.

Freehold areas in Dubai include plots in Jebel Ali, the Palm Island projects, Dubai Marina, Emirates Hills and Al Barsha, JLT, DSO, Jumeirah Village Circle among others. Registration of your property with the Land Department is important to claim full ownership.  Once a property is completed and handed over to the purchaser, the developer must register the title to the property in the name of the purchaser in the Real Property Register at the Land Department.Land will be registered in the name of a foreigner only after the developers submit a no-objection letter, stating that all the payments for the transaction have been made. The Dubai Freehold law specifies the functions and responsibilities of the Department of Land and Property, which has so far been doing all the work without much legal clarity. As per the law, the department will determine the survey areas; approve the land map and the fees for the services provided by the department.

There is no way for a foreigner to own property in non-designated areas. As far as residency is concerned, in principle, a person could own a property in the UAE and choose not to reside in the property, so you do not need to be a resident to buy freehold property as it could be your holiday home. Developers offer visas with property purchase where buyers are entitled to a six-month multiple entry visa. According to Gulf News, a recent cabinet decision entitles foreign property owners to a three-year residence visa if they buy a property worth Dh1 million or more, however this is not yet a law. Ownership of property and residency or sponsorship are interrelated but should be looked at separately.

Nevertheless, based on expert opinion, we list below the top 10 factors that anyone thinking of buying a property in Dubai must consider before making the move:

1.       Location

2.       Master developer’s delivery and maintenance track record

3.       Building contractor’s quality record

4.       Potential return on investment

5.       Recurring monthly costs, including electricity and service charges

6.       Seller’s existing mortgage prepayment requirements

7.       Buyer’s mortgage ability and availability

8.       Unresolved issues between Interim Owners’ Association and developer

9.       Overall property size

10.     Geopolitical risk

While this list is not exhaustive - and only indicative at best - keeping the above factors in mind will ensure that you are taking an informed decision.

Fees and Taxes of Buying Property in Dubai

• For off plan or new construction projects, buyers will need to pay land registration fees around 2% and annual charges for maintenance that depends on the development project.
• For resale properties, buyers will be paying all charges like off plan asset buyers. Additionally they will have to pay 1% to 2% transfer fee. This fee depends whether the asset is complete or under construction.
• All buyers of off plan and resale property, needs to pay 2% to 5% amount to real estate agent as agent fees. Lawyers are not involved.
• Whether you are a local resident or migrant in UAE going to buy Dubai property, you don’t need to consult with lawyer as they are not required for real estate deals in UAE.

Steps to remember while buying property:

LOCATION, LOCATION, LOCATION

Take a drive around your favorite areas of the city and decide which developments you can picture yourself living in. Lenders in Dubai pre-select which development they will finance so before you can talk mortgages it is a good idea to shortlist your most- liked areas.

LOOK FOR QUALITY DEVELOPMENTS

Not all developers were created equal. Look for a strong, well capitalized developer, which has a proven track record for delivering some of the most sought-after properties in the UAE. Choosing a reputable developer can help to ensure you are buying a high-quality apartment in a well-maintained building. It's your insurance policy for your investment in the future.

MAINTENANCE COSTS TRANSPARENCY

Dubai's real estate market is mostly comprised of apartments within high and low rise developments. While these types of developments offer apartment owners some spectacular views and a range of facilities including gyms, spas and pools they can also present some challenges in terms of how common areas are managed. Make sure to ask about the service charges or maintenance fees that as an owner you will be liable to pay.

FINANCING YOUR PURCHASE

There are different ways of financing property purchases in Dubai, such as off-plan stage payments: Most developers offer off-plan stage payment financing options. The buyer will pay an initial deposit and then the balance in structured payments (which are held in Escrow accounts) through to completion. Mortgage finance: Competition in the banking sector means banks are now offering very attractive mortgage rates below 5%.

COLLECT DOCUMENTS

Nobody likes paperwork but it is essential and having all the details clearly laid out in black and white will put your mind at ease. To buy off-plan a developer will only ask for a passport and a booking deposit. While documentation requirements may differ between lenders, generally you will need six to 12 months of bank statements, a copy of your passport with visa page, utility bill or tenancy agreement and a salary certificate from your employer, or minimum of two years audited accounts if self-employed.

KNOW YOUR LEGAL POSITION

The Dubai government has greatly simplified the process for buying and selling. It is well established that the Dubai Land Department only permits registration of property in the names of individuals, companies registered onshore in UAE or offshore within the Jebel Ali Offshore jurisdiction. This clearly affects the foreign corporate purchaser but not individual purchasers. Do your research to be clear on the registration process.

MAKE A VERBAL OFFER

Once you are comfortable with the amount you wish to spend and have organized your finances, you are now ready to make an offer. It is usually advisable to present the highest offer you can afford to ensure you don't lose out to another buyer.

PAY THE DEPOSIT

Typically the prospective buyer and seller enter an MOU, wherein the buyer commits to purchasing the property and the buyer commits to selling the property. The buyer pays an initial booking deposit. However, if the buyer withdraws from the transaction, the buyer will have to forfeit his or her booking deposit. Alternatively, if the seller reneges on the sale the seller refunds the booking deposit. Beware that buying from the secondary market can carry more risk, as the transaction is between the buyer and an individual seller, and if something goes wrong there can be little recourse.

PAY THE BALANCE

If you have purchased a property off-plan from a developer, you will be required to make stage payments, which are generally linked to key construction milestones. One of the major benefits from the off-plan financing model is that it is a bit like an interest free loan for the buyer. Often developers won't ask for the final payment until months after handover, which can ease the pressure on your finances when you are moving into your home. If you have taken out a mortgage to fund your property purchase, you will be paying incremental monthly payments for the duration of the loan.

MOVE IN TO YOUR NEW HOME

On the handover of the property, the new owner will have to register the property at the Dubai Lands Department to obtain a Title Deed. The property purchaser is responsible for paying the fees to the government. The fee for the Title Deed normally amounts to about 1.5-2% of the property value. Finally, you are ready to enjoy the fun part –decorating your new home.