How to buy a property In Dubai?
The post-COVID era has shifted our lives in so many ways. With the global economy going south and jobs and opportunities drying up, the need to re-evaluate savings and investments has become the need of the hour. Investment plans in such trying times might give us a cold feet, however, keeping in mind the long-term benefits it is a risk worth taking. Nothing stays constant. The current global pandemic situation won’t too.
Buying a property in Dubai can be an excellent investment opportunity at the moment. In this article, we will guide you step by step about how to buy a property in Dubai. Before we get into that, let us take a quick look at why buying a property in Dubai is rewarding now which will help put your horns of dilemma to rest.
Why you should consider buying a property in Dubai now?
New Policies by the Government
As indicated in the Frank Knight report, there has been a swift enactment of policy from the Federal and Local Governments in the UAE to support businesses and residents following the corona virus outbreak. The UAE Central Bank has released an AED 100 billion stimulus package to grant relief for up to six months for corporate and retail clients.
For a first-time investor financing a property in Dubai is easier than ever with a bouquet of options. A higher loan is now available to value on mortgages for both expats and Emiratis.
· The loan-to-value (LTV) ratio is increased from 75% to 80% for properties below AED 5 million and from 65% to 70% for properties above AED 5 million for a first time expat buyer.
· The LTV ratio is increased from 80% to 85% for properties below AED 5 million and from 70% to 75% for properties above AED 5 million for a first time Emirati buyer.
· The maximum off-plan LTV is increased from 50% to 55% for both first time expat and Emirati buyers.
· The UAE Government has given the Central Bank a go ahead for an increased exposure from 20% to 30% in the real estate sector.
Good deals on Properties in Dubai
This year looks favorable for buying a property with beneficial deferred payment choices. According to a report by the Property Monitor Dynamic Price Index, properties have become affordable among an increased segment of the population in the UAE.
Varied Investor Portfolio in Dubai
The last decade has witnessed an evolving investor portfolio in the Dubai property market. Property purchases have been made for both self-occupancy as well as rental returns.
The attractive pricing make it a win-win for all investors. The time is ripe to invest in a property in Dubai, thanks to the softened pricing and payment plans.
There are manifold direct benefits for international investors too. Instant gains and return on investments can be enjoyed without shelling out capital gains tax compared to property investments worldwide.
Standardized Real Estate Market
Keeping up with the demand and supply curve the developers are modifying the products and planning their launches according to the market demand. Properties are available to suit an array of buyers from salaried and business backgrounds. Due to the standardization in the market, buying a property in Dubai is on the rise.
The Expo 2020, though delayed by a year for the pandemic, holds promising investment opportunities for buyers. Experts opine that it would not adversely affect the property market. To boost the economy and maintain stability, the UAE Government had brought into effect few changes in the policies for the local and expat property investors. Lower property prices and better bank lending further sweetens the deal.
Affordable Luxury Homes in Prime Locations in Dubai
According to the Knight Frank Wealth report, Luxury homes in Dubai are affordable compared to other global cities like London, New York and Hong Kong. Expats or foreign nationals can invest in real estate in the freehold areas. Popular freehold areas in Dubai include Dubai Marina, Downtown Dubai, Business Bay, DIFC and Barsha Heights.
According to a report by Bayut, the posh areas in Dubai are top choices for investors. Recent reports show Dubai Marina as harnessing the majority of the interest followed by Palm Jumeirah.
Property prices in Dubai have dipped on average compared to 2018 and 2019 which have resulted in increased transactions.
Promising Rental Yields
One of the foremost advantages of buying a property in Dubai is high return on investments. Most prime neighborhoods in the city offer ROI of over 6% for apartment sales and villa communities generally yield rental returns of over 4%. Some popular neighborhoods like the International City offer rental yields of over 9%.
Dubai Property Visa
Property investors are eligible for long-term residency visas offering them more stability. Those with property investments amounting to AED 5 million can apply for a 5 year long term residence visa. A 10-year long-term residence visa is available to those who invest AED 10 million and above. Investors can sponsor their families on these long term visas.
Now that we know it is not just safe but also rewarding in investing in a property in Dubai, let us get into the details of how to buy one.
Buying a property in Dubai might seem a daunting task with loads of paperwork and formalities involved, however, in reality it is rather straight-forward. The Dubai Land Department and the legislating bodies in charge has set the grounds for a creamy and swift process for purchasing a property in Dubai.
Before buying a property in Dubai there are few things that the investor should be aware of which in turn would help them make an informed decision.
5 things to know before investing in Dubai Real Estate:
· Freehold and Leasehold Properties:
Anyone from any part of the globe can buy a real estate property in the Dubai Freehold Areas. Leasehold properties, on the other hand are areas where real estate is not up for sale but is leased out for period of 10 to 99 years.
- Purchasing Properties- Locals vs Expats:
Locals or Emiratis can buy property anywhere in Dubai or UAE. There is no Freehold or Leasehold cap for them. On the contrary, expats can only buy properties in designated communities or Freehold areas. Expats may lease a property for up to 99 years in the leasehold areas.
· Purpose of Property Purchase:
If you are planning to buy a property in Dubai be clear about your intentions. Is the property for personal use or is it just an investment for rental returns? Dubai is now a melting-pot with millions of expats calling it home. There was a time when property prices in Dubai were sky-high and out of bounds for most expats. Things have changed in the past couple of decades and many residents are now looking forward to buy their dream home in the dream city instead of renting one. If the reason for purchasing a property is to live personally, factors like the property’s proximity to schools, hospitals, supermarkets and restaurants should be considered.
Dubai real estate market is noted for multiple perks like tax-free, easy and transparent procedures, high capitalization of investment, high yield, and so on and so forth. People looking out to purchase properties with investment plans can gain a high return on investments.
· Researching about the Area:
Once the purpose for buying a property is clear, it is time to research different areas according to the buyers’ preference. Comparing different neighborhoods will give a fair idea about the pros and cons of living in those areas and the investor can seal the deal that suits him best.
· Researching about the Building:
To make sure that your hard earned money is being invested in the right property, look out for buildings that are constructed by well-known developers. Requesting your agent to arrange a meeting for you with the developer will help put your mind at ease and you can ask any questions that you may have. One of the important factors to consider is the age of the building.
As a property owner, you have to pay annual service charges. The service charges will have a direct impact on the ROI of your property. To avoid paying high annual service charges annually it is important to compare the service charges of neighboring buildings and their facilities.
It is of prime importance to take a closer look at the current real estate market trends before investing in a property in Dubai. You should be well informed about the market trends in the building where you intend to buy a property. Always ask for the quarterly selling price comparison, historical rental charts and current asking price from your agent.
Once you finalize the property, it is now time to take a look at the procedures involved in the purchasing process.
Off-plan property in Dubai
An unconstructed property purchased directly from a developer or in some cases a first owner is known as an off-plan property. This takes time but is the easiest way to buy a property in Dubai. Following are the procedures for buying an off-plan property.
· An application form is submitted to the developer by the buyer.
· Upon approval of the application, the buyer needs to do a site-visit to select the unit and pay the initial deposit.
· The buyer will have to wait for 2-3 years before getting the handover of the property. The developer will provide the completion date.
Buying a property on the secondary market in Dubai
This is a comparatively quicker process to obtain a property in Dubai. However, it entails a slightly more complicated process and higher expense.
· The buyer and seller agree terms.
· A MOU (Memorandum of Understanding) is signed and usually 10% deposit is paid.
· Both parties will meet at the developer’s office to apply for a No Objection Certificate (NOC) for selling the property.
· Once the service charges have been settled in full, the developer will issue the NOC.
· Upon receiving the NOC, ownership is officially transferred in the Dubai Land Department. When all the formalities are completed the buyer will be given a new title deed.
· In case the buyer is purchasing the property with a mortgage then the bank’s role will come into action. The buyer is liable to settle the seller’s mortgage in full if the seller has a mortgage on the property before applying for the NOC.
Last but not the least, let us take a look at the fees and charges involved in purchasing a property in Dubai.
· Agent’s Fee/ Commission-
Real estate agent’s commission is 2% of purchasing value.
· NOC Fees-
The NOC fees ranges between AED 500 and AED 5000 which is usually payable by the seller to the developer. Some developers ask for a refundable deposit from the buyer which is refunded once the buyer bestows the new title deed at the developer’s office.
· Transfer Fees-
Transfer fee is calculated at 4% of the purchase value and is paid to the Dubai Land Department. This payment is made in the mode of Manager’s check.
· Registration Trustee Fee-
Registration Trustee fee is AED 2000 if purchase price of the property is less than AED 500,000. If the property value exceeds AED 500,000 the trustee fee doubles up at AED 4000.
· Mortgage Registration Fees-
If applicable, Mortgage Registration Fees are calculated at 0.25% of the registered loan amount and paid to the Dubai Land Department.
· Annual Service Charges-
Annual Service Charges are asked to be paid in advance by the developers.
If buying your dream home or investing in a property in Dubai has been on your mind for quite some time now, think no more. It will be a lifetime asset to be cherished forever. If you are still unsure about how to take the first step, Zeekeez is here to help you in every step of the way.