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Destination & Buyer Guides |
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 Buyer Guide
In direct contrast to the highly sophisticated sales process in Dubai which sees developers and estate agents presenting potential clients with superior show homes to view and lovely brochures to peruse, the property buying process in Dubai currently lacks some sophistication and transparency.
There are certain aspects of the property purchase process in Dubai that require specific clarification and this guide will show you exactly how to buy investment property in Dubai and avoid the common issues that investors can encounter.
First things first if you’re serious about buying property in Dubai you should have your finances sorted out before you begin searching for real estate. This is because the purchase process, when underway, can progress very rapidly and if a property investor does not have a mortgage agreed or money to hand the sale can fall through because the market continues to be so fast moving.
In terms of arranging a mortgage to buy property in Dubai an investor can either do this in his country of residence or locally in Dubai. More financial institutions are offering more products to non-resident purchasers every month, so it pays to shop around for the best interest rates and payment terms. If the investor requires finance to purchase a resale property he will have to have a valuation done on that property to satisfy the financial institution that it is worth the asking price.
 With finance agreed in principal an investor can begin his search for suitable investment properties for sale in Dubai. Since 2002 there are many developments that are for sale freehold to foreign buyers in Dubai including Arabian Canal, Arabian Ranches, Burj Dubai, Discovery Gardens, Downtown Dubai, Dubai Business Bay, Dubai International Financial Centre, Dubai Land, Dubai Lagoon, Dubai Marina, Dubai Sports City, Dubai Waterfront, Emaar Towers, Emirates Hills, Green Community Village, International City, International Media Production Zone, Jumeirah Beach Residence, Jumeirah Islands, Jumeirah Lake Towers, Jumeirah Village, The Greens, The Lakes, The Lost City, The Meadows, The Palm, Deira, The Palm, Jebel Ali, The Palm, Jumeirah, The Parklands, The Springs, The Views and The World. This means an investor has a wealth of choice!
It’s wise therefore to have some idea of the type of property you’re after before you begin searching! Those hoping to rent real estate out to Dubai city based workers should look for quality, well located and serviced apartments; those looking to target the family market should be looking at detached villa properties and those hoping to target the tourism market can choose anything from golf apartments to villas in Dubailand.
All in all there is so much in the process of being built that an investor will have to spend a lot of time comparing the qualities of a given development, developer and property with everything else that’s available to ensure he gets the best value property for his budget and investment criteria.
 If a property investor in Dubai is interested in profiting immediately from his real estate investment he may seek to purchase resale property. Because there is currently no formal conveyancing system and no way of searching freehold title deeds held by overseas purchasers in Dubai, an investor should ensure the property transaction for any resale unit goes back via the original developer. This is critical otherwise the investor could become the victim of fraud with the vendor not having permission to sell for example or having sold the property to multiple buyers or having outstanding debts against the property.
It cannot be emphasized strongly enough - an investor interested in any resale property must contact the original developer before signing any contract to purchase.
Some property investors flip their properties on to a secondary purchaser during the construction period to take any capital gains already accrued; in terms of buying a resale property during its construction period the majority of developers allow for the resale of off plan property but some like Emaar only allow the original purchaser the right to resell during construction. The secondary buyer cannot sell on any Emaar property until it has been completed. Issues like this are changing all the time however, which is another reason why it’s critical for a buyer to contact the original developer if he is considering buying a resale property.
In terms of purchasing during the construction phase this is the norm in Dubai currently because the majority of property developments are still to be completed! The process typically follows this path:
- The investor agrees which unit he wishes to purchase and pays a holding deposit of between £1,000 and £3,000.
- Contracts are drawn up and these detail the payment schedule.
- Usually a buyer will need to pay between 10% and 20% of the purchase price of the property every three months.
- A property can usually be resold during construction but a transfer fee of around 2% will need to be paid to the developer.
- The build time can be anywhere between 12 and 36 months.
There are no escrow account structures in Dubai therefore any money an investor pays goes into the developers’ accounts effectively to fund the build process. In some less well regulated emerging property markets in the world this has subsequently led to developers accidentally overspending and getting through the money before properties are complete! Luckily in Dubai the government has a sophisticated process in place whereby any developer wishing to sell property units has to agree to place 50% of the price of each unit in a bond and only then is he allowed to sell his property. This effectively means that if a developer were to go bankrupt or renege on a contract in Dubai the government would have sufficient funds in the bond to get the project completed.
 Although there is no official conveyancing system in Dubai it does make sense to employ a lawyer to check the terms of the contract and to manage payments at the very least.
The good news for a buyer looking at buying investment property in Dubai is the fact that there are no property related taxes to speak of. This means that there is only minimal additional outlay with buyers having to cover lawyer’s fees and then of course the ongoing maintenance of the property and any shared areas or facilities. Those who purchase units in superior apartment blocks which have sophisticated shared facilities should consider how much annual maintenance fees may set them back and deduct this sum from their profit predictions and calculations.
And finally, if and when a property investor decides to sell on his real estate assets in Dubai he will either have to give his lawyer or real estate agent power of attorney or be present when the property sale goes through as the original developer will require the investor’s signature on any transfer documents. |
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