Buying Property in Dubai
Frequently Asked Questions
Why are property prices subsidised when sold off plan?
Dubai has limited reserves of oil that will only last a few more years. The rulers of Dubai have decided that the way forward for the country is to lead the world in tourism. Dubai currently has a population of just over 1 million people and the government are looking to increase to 3 million in just over 2 years. To increase the population Dubai must be an attractive place to live and also an easy place to initally buy property.
Why is there so little 'red tape' when buying property in Dubai?
For the same reasons as above. Dubai is all about trading and the country wants your business! When you buy a property in Dubai you sign a contract with the developer and this is your binding documentation. There are no solicitor's fees. No stamp duty and certainly no tax. You can then apply for a residency visa which means you can open a bank account and ultimately trade there tax free!
I have heard I need a local sponsor to buy property in Dubai, is this true?
No, not any more, most properties are now freehold to make the market more attractive. It will say in your contract whether or not the property is freehold.
Do I get the title deeds?
Eventually you will. At the moment there are 87,000 new properties being built in Dubai. As this is very new in Dubai and their property system is not as developed as ours, you will not get the deeds until after the property has been completed. If, however, you wish to resell the property before it is built or any time up to completion, then all you need is your original contract with the developer.
How can I trust the developer?
There are very few developers in Dubai and each of these have to have a Sheikh as a sponsor. Ultimately, each developer is overseen by the government and therefore does not have any risk attached to them. You must remember that this is a country that wants to increase tourism and reputation. The government will not accept workmanship that is not to the highest standard.
How can I maximise rental returns?
There are many companies who can manage rentals on your property once you have purchased it.
Is It difficult to get a mortgage?
Once you have 30% equity in your property there are various mortgage options for the remaining payments available from one of the local finance companies, including HSBC and Tamweel. Mortgages are normally non-status and at a fixed rate of between 5% and 6%.
Why Pay A Transfer fee?
A transfer fee is payable to the developer at present because the individual properties are purchased as freehold, but the lot upon which it stands remains under the control of the developer until land registration occurs. The transfer fee is an administrative charge, for the purposes of ensuring that contract and ownership documentation are transferred into the new purchaser's name.
What is a premium?
The amount that you pay above the original price charged by the developer. This can be a percentage of the original price, or a fixed amount. The premium plus the original price is the net selling price to the owner, and does not include transfer fees or commission.
What is a transfer fee?
This fee is paid to the developer in transferring ownership from seller to buyer. It varies between 1 per cent and 7 per cent of the selling price or original price and so can be a substantial amount, usually paid by the buyer.
What is commission?
Normally 2 per cent of the selling price and again the buyer pays, although on occasion the owner may pay 1 per cent of this.
Why do people want to know the original price?
This is the price which the original owner paid to the developer. From this you can work out the percentage premium which is often used as a guide to see if a property is good value or not. In addition, when financing, all lenders need to know the original price, as most will not lend on any of the premium.
What is the BUA?
This is the Built Up Area of a property and not just the ground floor area. This includes all floors and the balcony or terrace area. Carpet or covered area is the built up area excluding the balcony or terrace. The Plot area is the total size of the plot including the garden.
What is a Phase?
This is the release of a fixed number of units at a specific moment in time. Most developers release units over several phases and re-evaluate the prices after each release.
What is Initial Deposit?
This applies when buying direct from a developer and is paid to the developer in order to secure the property in your name. It is usually 10 per cent or 15 per cent of the selling price.
What is Holding Deposit?
This secures the property for a period up to one month usually, allowing the buyer time to organise funds through either financing or transferring of cash funds. This deposit is non-refundable and can range from Dh20,000 to Dh1,000,000 depending on the property price. During this time, the owner agrees not to increase the price or sell it to anyone else.
What is a Memorandum Of Understanding?
This is a contract made between the buyer and seller to secure the sale. A holding deposit is paid to the agent or seller to make the contract more binding.
Are there different types of Freehold?
If we assume that the term freehold is being used in Dubai in its international sense, then the answer is yes. Freehold usually indicates that the owner of this kind of title enjoys the most superior form of private property ownership.
A purchaser can have freehold title in land, in a free standing villa and also for an apartment, the latter kind of ownership is usually called commonhold and not freehold.
Can a foreigner hold a title in Dubai?
In May 2002, General Shaikh Mohammad Bin Rashid Al Maktoum, Dubai Crown Prince and UAE Defence Minister, announced that 100 per cent freehold ownership of certain properties in Dubai was available to all nationalities. Furthermore, while new comprehensive legislation dealing with the ownership of land in Dubai is expected soon, there is currently no UAE law that prohibits foreigners from owning property.
Can one lawfully sell freehold properties to foreigners in Dubai?
There is no provision in the law that forbids immovable property (except in an auction) from being sold to foreigners in the UAE.
In case of a husband's death, is the property distributed according to Sharia?
This is a very grey area and opinions differ widely, and is an estate planning concern. As such, I suggest that purchasers approach their lawyers or accountants to take their estate planning issues further.
Are there any restrictions imposed on freehold apartments?
Yes, there are some restrictions being imposed in most sale and purchase agreements issued by developers in Dubai; these conditions are to make sure that owners of properties pay their Service Charges in time, especially if they intend to sell their property. The new land law for Dubai of which legislation is expected soon, may also contain further restrictions.
Does the buyer have the authority to sell the property or apartment? If so, when?
If a buyer has not yet become the registered owner of a property, then he can cede (i.e. transfer) his rights in his agreement of purchase under certain conditions to another purchaser but subject at all times to the approval of the Seller. Purchasers, once they are registered owners, are able to sell their property freely subject to all Service Charges and/or penalties having been paid.
How often will the Service Charges increase or will they fluctuate?
It is expected that the Service Charges levied will be reviewed yearly and only if necessary, increased annually. Unless all the owners of the building/dwellings have to pay for an emergency expense, it is not expected that there will be dramatic fluctuations or increases in the Service Charges during the year. There should not normally be an increase by more than 10 per cent in the Service Charges per year.
What type of residency visa is received upon the purchase of freehold in Dubai?
The residency visa is arranged by the developer and is usually a 3-year renewable visa. It does not normally include a work visa. It is purely to allow the owner and his immediate family to reside here without needing to renew transit visas. You may be required to pay the fees depending on the developer.
Why are Guarantees needed?
If properties are not handed over for whatever reason to the purchaser after a particular time period, the buyer usually has the option to get his money back or receive some form of compensation. Most developers give a 10-year guarantee from structural defects.
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