The Freehold Decree issued in the year 2002, is a legislation that allows expats to buy, sell and lease or rent property in Dubai independently. This legislation has made it easier for foreigners to conveniently own a property in Dubai. The increasing rents and booming property market has made the option of buying property in Dubai more attractive. Some of the factors explained below need to be taken into account for making a wise decision when buying property in Dubai.
Whether one is buying Dubai real estate to live or buying to let greatly influences the type of property one purchases. If the property is bought with intention of yielding high returns then options of property with highest rental yield should be explored .In contrast to this, if one intends to buy a house to live then he/she can consider all the comforts and preferences before making a decision. For instance, in Dubai one bedroom apartments give better returns as compared to spacious villas, so if you are buying to invest, then an apartment for sale in Dubai is your best choice.
When thinking of buying a property in Dubai, purchasing directly from the developer or taking well reputed real estate agent’s services is best. Although most of them have a good track record, one needs to ensure the credibility of both entities. Mostly they charge a fee of about 2 -5%of the selling price.
If purchasing from a developer one should visit presentation centers and show homes to get an idea of what the development would look like after completion.
One can take an attorney‘s assistance for the purchasing process to avoid any hassle...
To meet the eligibility criteria of buying property in Dubai, one needs to be over 21 years of age.
The first step in purchasing a property in Dubai is making an oral offer to the seller. Once the deal is made orally, then a formal sales contract is drafted and agreed upon between the parties; a deposit is made, the buyer obtains financing, the seller ensures that the property is perfectly fit for transfer, and eventually the deal is sealed. On many occasions the seller might need the assurance that an expat has been “pre-approved for home financing” before signing the sales contract.
The two different types of deals depend on whether one purchases property from a developer, called an “off-plan” purchase, or purchases property from a private seller, called a “resale” purchase.
When purchasing a property directly from a developer – an “off-plan” purchase will be made. Expats will need to submit a completed reservation form with their passport. The terms and conditions of sales agreement, payment plan details and personal details of buyer and seller are outlined by the reservation form. Then a reservation deposit is made by the buyer to the seller and a formal sales and purchase agreement is drafted.
The sales and purchase agreement is very much similar to the reservation agreement. It is highly recommended to decide beforehand when this document will be drafted, since many times developers might require the expat to pay up to 20 percent of the property price.
If the property purchased is not yet completed then the purchase agreement should include the details of completion date and the compensation awarded if the property is not completed by that time period. Furthermore, if the property is to be furnished, decide on an appropriate deadline for furnishing.
To complete the process of buying property in Dubai the buyer must transfer the deeds. This is done at the developer’s office if the property has yet to be completed or at the Land Department offices in Deira if the property is already registered. The buyer must obtain financing and pay 100 percent of the property price at this point.
One must ensure that all deposits and payments should be paid into a Real Estate Regulation Agency (RERA) approved securities account. In these accounts, the money is gradually released to the developer according to the completion stages of the development. Moreover, the account should be in the name of the project, not the developer.
It is then a norm that the buyer can inspect the property and make a “snag list” of any issues that the developer must address.
If purchasing from a private seller – a “resale” purchase – the buyer and seller will need to agree on a Memorandum of Understanding (MOU), a document that outlines the terms and conditions of the agreement. This document also details the date of the final transfer of funds from the buyer to the seller. It is not binding.
The buyer then makes a deposit, which is usually 10 percent of the property price, or whatever has been mutually decided between the two parties. . This amount is often not refunded unless for some reason the seller is no longer able to convey the property to the buyer. The real estate agents fee is also paid at this time.
After obtaining financing, the formal transfer of deeds can take place. Expats must make full payment before the transfer takes place.
Like an “off-plan” purchase, it is then possible to inspect the property and make a “snag list” of any issues that the seller must address.
Apart from the legal fees and the payment made to the developer or the estate agent, other costs may include land registration fees and maintenance fees.
For recently constructed developments expats might be charged two percent on land registration fees.
The maintenance fee can either be a fixed rate or a rate depending on the size of the property.
There is no property purchase tax in Dubai. However, fees must be paid for transferring property .The taxes are charged on transferals, which can be anywhere between 1% and 7 % of property‘s purchase price.
The above is not legal advice and as property laws may change on a regular basis expats considering buying property in Dubai should first seek appropriate legal advice.
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