Dubai – The Global City
The bustling urban development in the UAE – and Dubai in particular – means that the city has become one glamorous centre of malls, restaurants and culture. A megapolis with a massive expat population, Dubai embodies the power of vision and single-minded investment. Well connected to all major cities of the world – particularly to the Europe and Asia – Dubai has drawn people from all corners of the world, either for professional purposes or for leisure. As per the Dubai Land Department (DLD), the city witnessed a 14% rise in real estate transactions in 2017.
Some surveys have also claimed that Dubai is the preferred city to reside in, surpassing London. “How can we buy a house in Dubai?” is thus a question that isn’t uncommon these days.
Who are eligible to buy a house in Dubai
It is to be noted that the expatriates constitute nearly 70% of the total population of Dubai. Locals and foreigner alike are permitted to make real estate deals in Dubai. This was not the case in the past though. In 2002, with the passing of the Freehold Law of Dubai, foreigners – attracted by the regime of zero taxation on rental incomes and capital gains – can buy, sell or rent property in the city, without having to require any additional permission.
While locals have no such restrictions, there are some pockets of Dubai where foreigners can only rent premises, but close to 90% of the city is available for these customers. So if anyone is thinking, “Its Dubai, it’s not my homeland, can we buy a house in the city?” the response is an emphatic yes.
What kind of due diligence is required
When someone harbours ideas about buying property in Dubai, the thought process needs to be very similar to practically anyone who is thinking, “How can we a buy a house?”. The due diligence is exactly the same.
- List the requirements: The first requirement is to determine if the buyer is sure of purchasing a property or land, rather than renting it. There are obvious benefits to the latter (especially if the person in question is unsure about the duration of his/her stay in the city), but if other issues are at play (investment for long-term capital gains, growing roots etc.), buying is a preferred option.
The next decisions when the buyer thinks, “Can we buy a house in Dubai?” is to determine the size of the property that he/she will require, the locality that will suit the most and most importantly, the traffic concerns. Readers are warned that the traffic in Dubai is overwhelming, so long commutes should be avoided.
- Parking space is a must: Summers in Dubai are quite hot and in the absence of a covered parking space, vehicle lives can be tough. It is thus important for car owners to pay attention to check availability of parking facilities before finalising on the property.
There are three kinds of properties available in Dubai:
- The freehold property: These are the common choices of most expats and foreigners looking to invest in Dubai. These properties usually come in the form of undeveloped land parcels (and less commonly as complete apartments), upon purchasing which, the buyer has full discretion regarding selling, renting or retaining. The UAE government has a list of approved real estate developers who can provide a prospective buyer with the necessary details.
- The usufruct properties: This is essentially a modification of a long-term lease. The buyer of these properties is free to sell, rent or retain the property, so long as it is not razed. The tenure of this kind of purchase can last anywhere between 10 to 100 years.
- The common hold properties: This is akin to standalone finished properties or condominiums in other countries. It is very similar to a freehold property, the only difference being that freehold properties are usually plots of land. The purchaser, however, has to continue paying the maintenance fee to the apartment developer even after the purchase of the property.
Only a few of the buyers who think, “Can we buy a house in Dubai?” can actually do so unaided. Bank loans are a common route to fund these purchases. This is especially necessary considering that most purchases entail a 25% down payment. Some developers even go an extra length to charge the full amount as a downpayment, which can be a big dampener to the buyer’s dream of “Can we buy a house?”
A rule of thumb is to start arranging for finances as soon as the thought crosses the mind of the buyer-while it may be possible to arrange for a mortgage loan from the homeland bank, this route should be availed only if the buyer is fairly sure that the Dubai-based banks are not offering a more lucrative rate.
A preferable way is to bank with Dubai-based banks. There are several reputed multinational banks in the city. A reasonable income, a good credit record and proper documentation are all that is necessary to secure a loan at a market-appropriate rate.
Mortgage plans in Dubai typically range between 15 to 25 years, though at no point is the borrower allowed to repay more than the 35% of his/her net household income in a month.
Be aware of the legal requirements
When someone ponders “Can we buy a house in Dubai?”, he/she may choose to seek legal advice and help from lawyers in the city, who are well versed in the various aspects of buying property here. It is always a safe way to ensure that the buyer does not end up investing vast sums of money in scams or end up in disagreements, though instances of the same have been rare. Also, any kind of purchase will entail a list of payments to be executed for several stakeholders; a lawyer or a consultant can offer a step-by-step guideline regarding the timelines and amounts, thus reducing fallbacks.
Dubai stands apart from other global cities in its massive supply of ultra-modern residences. Recently, however, the city has been witnessing a push towards construction of more affordable housing so as to mix up the real estate mix of Dubai. The local real estate regulations have also been amended to that end.
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Q&A with Propertytime.ae