Challenges of buying property in Dubai

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An easy guide on how to buy a property in Dubai

In 2002, Dubai’s Crown Prince issued the Freehold Decree or a formal legislation allowing foreign nationals to buy, sell, and lease or rent a property at their own discretion. With no special permissions required, it is easy and profitable to buy a property in Dubai. Having said that, buying property in Dubai has its own set of challenges. In this article, we will walk you through the process so that you can avoid the risks of buying property in Dubai.

Determining the Purpose

As basic as it may sound, the first challenge is to determine why you want to buy property in Dubai. Are you planning to live there? Do you intend to lease it? This can help you in finalizing the type of property that you should consider buying.

So, if you are buying a property to live in, then you must ensure that it is conveniently located to your place of work or regular visit. Also, if you plan to live with your family/kids, then you must inquire about schools and play areas nearby too. On the other hand, if you are planning to lease it, then assess the rental yield of the property and demand for rental apartments in the area before buying.

“New to Investment? Know its fundamentals here”

Finding the property

finding a property in dubai to buy

The second challenge is finding the right property. You can search online for a property for sale in Dubai, or talk to a local estate agent who can help you with the same. Many investors also approach developers to invest in upcoming projects. This, of course, should be done with due diligence and after visiting the presentation centers and show homes.

Remember, the agent or developer might charge you a small fee over and above the price of the property.

Buying Process

The third challenge is being aware of the entire buying process so that you know what needs to be done and when. Here is a quick look at the process of buying Dubai properties:

  1. Make a verbal offer to the seller
  2. On acceptance of the offer, get a formal sales contract drafted and agreed upon
  3. Make a deposit
  4. The buyer obtains a loan if needed
  5. The buyer makes the final payment or an agreement on a payment plan is made
  6. Deed is transferred

There can be minor variations to this process depending on the type of property and seller which needs to be addressed accordingly. The buying process can vary when you buy a property from a developer (off-plan) or a private seller (resale).

‘Off-Plan’ Purchase

  • Buyers need to submit a completed reservation form along with their passport.
  • Next, a reservation deposit needs to be made
  • Post this, a formal sales and purchase agreement is drafted

Some points to remember:

  • Check the amount of reservation deposit required
  • For under construction projects, ensure that the purchase agreement has a completion date and compensation amount included if the project is not completed on the date specified.
  • The transfer of deeds must be ensured after you make the 100% payment

‘Resale’ Purchase

  • A Memorandum of Understanding (MoU) is drafted based on the terms and conditions of the agreement.
  • A deposit needs to be paid, as agreed.
  • In most cases, the estate agent’s commission is paid at this time.
  • Finance can be obtained now (if you don’t have a pre-approved housing loan offered by any bank)
  • Final payment is made
  • Deed is transferred

Some points to remember:

  • Ensure that all essential points are covered in the MoU
  • The deposit paid is non-refundable. The seller can return the deposit if he is unable to complete the sale for many reasons.

“Know the Importance of Diversification in an Investment Portfolio”

Availing a loan

taking loan to buy property in dubai

Most investors with a good credit record get a pre-approved housing loan offered by banks. This can be an ideal scenario since the entire process can become quicker and less cumbersome. If you don’t have a pre-approved offer, then you can approach banks for housing finance. Typically, the following documents will be required:

  • Passport
  • Proof of residence
  • Proof of address
  • Salary certificates or proof of current income
  • Bank account statements of the last three to six months

Some points to remember:

  • You can get a loan for up to 25 years
  • Your monthly repayments (loan installments and any other fixed monthly expenses) should not be more than 35% of your net monthly income. (You should check with the bank before applying)
  • You can have an overseas loan to buy a property in Dubai

Taxes and Fees

The structure of fees and taxes is highly simplified as compared to other international real estate investment cities. Here is a broad list of fees and charges involved in a buying property in Dubai:

  • Transfer Fee
  • Registration fee
  • Mortgage registration fee
  • Mortgage processing fee
  • Estate agency fee
  • Conveyancing fee
  • Valuation fee
  • Oqood fee, for off-plan properties

It is important to note that some of these charges might not be applicable to you (like mortgage-related charges if you are not availing a loan). This is merely a list of charges applicable.

Summing up

Before you buy property in Dubai, it is essential to understand the challenges that you might face and the best way to face them is to be informed. Research well, spend some time in understanding the market and seek advice from experts, before you start looking for a property for sale in Dubai.

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