Buying a property in Dubai can be overwhelming, not knowing where to start or where to get the best honest, impartial advice. As a first-time buyer or property investor, it is important that you are aware of legal considerations and requirements before you dive in. Buying a property in different locations around the world comes with different rules and regulations and the process itself differs. In some countries, you need a lawyer involved. In some countries, you don’t. Buying costs also vary depending on where you are buying and what type of property you are buying.
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DUBAI REAL ESTATE LAW – PROPERTY IN DUBAI
Buying a property in Dubai is relatively easy and straightforward, and you don’t need a lawyer, unlike some countries. All legal aspects concerning buying a property in Dubai are regulated by Real Estate Law No. 7 of 2006, Land Registration Law. This law is to protect buyers, investors and sellers. Article (4) of Law No.7 of 2006 outlines who is legally able to buy and own property in Dubai. According to the law, you can buy real estate anywhere in Dubai if you are a UAE National or a GCC citizen, and you aren’t restricted by area or type of real estate asset. For example, as an Emirati National, you can buy land, apartments or villas, but as an expat, non-Emirati National, you can only buy property in designated freehold communities, and you cannot purchase residential land. Having said that, in recent years, the number of freehold communities has increased in variety and locations, meaning non-Emirati, expat buyers have a wealth of choices when choosing where to buy and what to buy. In recent years you couldn’t buy property in Jumeirah unless you were a UAE national, but in recent years leading UAE property developers have launched freehold residential communities in and around Jumeirah, making it accessible to almost all investors and buyers (locally and internationally). In Dubai, there are two types of property ownership for expats or foreigners in Dubai, including freehold and leasehold real estate. Buyers’ rights are the basic difference between the two types. When you purchase a property on a leasehold basis, you will have property rights for a fixed length of time, but when you buy a freehold property, you will get complete ownership of that asset and the land on which it is built.
LEGALITIES OF BUYING A PROPERTY IN DUBAI
When considering buying a property in Dubai, there are four primary steps to follow.
Drawing up a contract between the buyer and seller
Once you have decided on the property you wish to purchase, the first step is to negotiate and agree on the terms and the price with the international real estate developer in Dubai. You have two options regarding payment, either cash or home finance. If you’re a resident in the UAE and an expat, most local UAE banks will provide up to 70% of the property value in home finance, and up to 30% down payment would be required to secure your property and some of the buying fees/costs. As a non-resident, most UAE banks will lend up to a maximum of 50% of the property value, but this is based on your individual status, credentials and financial status and differs from bank to bank. It is a straightforward process to obtain a mortgage for a resale (ready) property. With off-plan property purchases, the mortgage can only be obtained when the project is nearing completion, and the loan-to-value ratio will be dictated by the current market value of your property at the time of completion.
Signing the sales agreement
The second step in the buying process in Dubai is signing the sale/purchase agreement, which is also known as the Memorandum of Understanding (MOU). The MOU or Form F as it is called, is one of the Real Estate Regulatory Authority (RERA) forms. Form / Contract F is readily available on the Dubai Land Departments (DLD) website. If a real estate broker is handling your property purchase, your designated agent will get the contract prepared on your behalf. Once the agreement is ready and reviewed, the buyer and the seller must sign it in front of a witness (usually the estate agent) at the Registration Trustee’s Office in Dubai. Upon signing the agreement, the buyer needs to pay a standard 10% security deposit to secure the property. This is paid to the Registration Trustee and is returned to the buyer once the property transfer is completed. Once the sale agreement is signed, the deal/purchase is official and confirmed. No changes can be made to the price or the terms thereafter.
No Objection Certificate
The third step in the buying process in Dubai is to request a No Objection Certificate (NOC). The buyer, seller and real estate broker/agent are required to meet at the property developer’s office to request the NOC to transfer the ownership of the property. The buyer must pay for the NOC, and after payment, the developer will issue the document. If, however, there are any outstanding service charges or debts on the property, these need to be cleared by the seller before the NOC can be issued. This ultimately protects the buyer from taking on previous debts attached to the current/previous owner. Similarly, the seller must clear his / her home finance before the NOC will be issued by the developer. This again protects the buyer.
Transfer of ownership with Dubai Land Department
As the buyer, once you have successfully received your NOC, the final legal step relating to buying a property in Dubai is to meet the seller to complete the transfer of ownership from the buyer’s name into your name. This is undertaken at the Dubai Land Department’s office. To ensure a smooth transfer, you must ensure you have the following documents ready and in hand:
- Signed Contract F (MOU)
- A manager’s cheque for the property price payable to the seller
- The original No Objection Certificate (NOC) issued by the developer
- Original identification documents of the buyer and seller (Emirates ID, passport).
Once the formalities are completed, a new title deed will be issued in your name, and you will officially become the new owner of the property in Dubai. Please note, though, that if your property has a mortgage, the bank will keep the original title deed until your mortgage/home finance payments are cleared. Technically, the bank owns your property until you clear all your debts.
FREQUENTLY ASKED QUESTIONS
Frequently asked questions about Hadley Heights
Buying a property in Dubai can take anywhere between a few weeks to a few months, depending on the Types of Residential Properties in Dubai and if there is a chain involved. Home finance also can make the buying process longer. As a property buyer in Dubai, it is recommended that you get pre-approval for home finance in place before you start looking for property, as this will speed up the buying process on the whole.
Buying costs in Dubai are pretty standard and, on the whole, lower than most international cities on average, as you don’t require a lawyer or legal representation. Typically property buying costs in Dubai are broken down as follows:
- Dubai Land Department Fees: DLD fees equate to 4% of the property value + AED 430 for land, AED 40 for off-plan, or AED 580 admin fee for apartments and offices.
- Property Registration Fee: Properties valued below AED 500,000: AED 2,000 +5% VAT Properties valued above AED 500,000: AED 4,000 + 5% VAT
- Title Deed Fees: The total fee for issuing the Title Deed is AED 250
- Agent Fees: Typically agents charge buyers a fee of 2% of the property value and sellers 1%.
- Mortgage Processing Fees: These vary from bank to bank, and some banks charge zero processing fees.
Buying a property in Dubai can be overwhelming, not knowing where to start or where to get the best honest, impartial advice. As a first-time buyer or property investor, it is important that you are aware of legal considerations and requirements before you dive in. Buying a property in different locations around the world comes with different rules and regulations and the process itself differs. In some countries, you need a lawyer involved. In some countries, you don’t. Buying costs also vary depending on where you are buying and what type of property you are buying.
HOME FINANCE FOR BUYING PROPERTY IN DUBAI
Are you an expat UAE resident?
As an expat UAE resident, you can contact local UAE banks directly to request a pre-approval for a mortgage. This approval will be based on your financial status, and you will be required to provide various documents, including a passport, residency visa, Emirates ID, salary certificate and last six months’ bank statements from a UAE bank. You will also need to declare any other loans/home finance which you have, along with all financial assets versus debts. After providing all this information, the bank(s) will provide you with the maximum amount which you can borrow for home finance. Typically as a UAE resident, you can borrow up to 70 – 80% of the property value, but this varies from bank to bank. This is based on key-ready secondary property and does not apply to off-plan property purchases. For off-plan mortgages, pre-approvals must be requested once the project is nearing completion and not before. Often buyers contact a mortgage broker who will shop around all UAE banks for the best offers and home finance packages on your behalf and charge a fee for their services. Once you have your mortgage approved and you are happy with the offering, you will also require approval on the mortgage from the Dubai Land Department, which will enable you to obtain the NOC.
Are you a non-UAE resident?
As a non-UAE resident, a similar process applies, but normally UAE banks will only lend non-residents up to 50% of the property value when buying real estate in Dubai. Some developers in Dubai now offer attractive post-handover payment plans to overseas investors and property buyers, so it is worth asking your preferred developer about the different payment plan options available on off-plan.
Bank Mortgage Fees
Mortgage fees when buying Dubai property include: Mortgage Processing Fee: 1% (of the amount borrowed) Property Valuation Fee: AED 2,500 to 3,500 + 5% VAT
WHAT HAPPENS IF THE SELLER HAS AN EXISTING MORTGAGE ON THE PROPERTY?
It is a seller’s obligation to clear his mortgage/home finance before the property can be transferred over to the new buyer. This must be completed before applying for the NOC.
IS DUBAI PROPERTY A GOOD INVESTMENT?
In summary, yes, buying property in Dubai is a great investment, provided you do your research and buy through a reputable estate agent or developer. Do your homework, research what is currently available and decide what your budget is before you choose what to buy. Dubai is one of the safest cities in the world, and this is one of the reasons why Dubai welcomes a high volume of foreign investors looking to set up business operations in Dubai and move their family to the UAE. Buying property in Dubai comes with relatively low risk involved, and as a property owner, you pay zero Capital Gains tax and zero rental income tax, unlike most other major cities globally. This means apart from your mortgage (if applicable), service fees and maintenance costs, you don’t have any other outgoings to worry about. The trick is finding the right property to suit your requirements and finances sensibly over a longer period of time, as you can always pay off your mortgage early with a small penalty, but it’s hard to extend the tenure once you have committed to a mortgage with a UAE bank. Another recommendation is to lock in a fixed-rate mortgage for as long as you can, to avoid having to move your mortgage to another bank to lock in a new fixed rate. Normally with UAE banks, once a fixed rate period ends, your rate automatically transfers to the variable, which works in your favour if interest rates are low, but if rates have increased, your mortgage will be more expensive and out of your control.
