STEP BY STEP GUIDE TO BUYING REAL ESTATE IN DUBAI
1 Figure out what you can afford.
Remember for buyers there is a 2% agency fee and a 4% transfer fee to take in to account when it comes to any purchase. Are you planning to mortgage? Then you will most likely need at least 25% of the property as a down payment. You will also be paying interest on your loan which varies, but is around 3-4% depending on length of loan and bank. Make your calculations to set a budget – your agent can help you with this step.
2 As a Finance Buyer, are you pre-approved?
Being pre-approved not only confirms your budget but it also puts you in a stronger buying position. First, a bank reviews your application, before issuing a letter or an email stating the approved loan amount, which is generally valid for 60 days.
3 Find a Real Estate agent and company that you trust.
Find an experienced agent to work with you to understand your full budget, wants and requirements. When working with industry experts, the more detail you go into at a preliminary stage, the less time it takes to find the right property. It is very important at this stage to give your agent the best understanding of what you are looking for.
4 Start viewing properties!
As a property consultant, your agent will highlight communities and properties that match your budget and requirements. Arrange appointments to view several options until you find what you are looking for.
5 Make an offer.
For the strongest chance of acceptance, we recommend putting your offer in writing, with a copy of a 10% deposit cheque, along with copies of the passport and Emirates ID of all parties who will be on the title deed.
6 Once the offer is agreed sign MOU.
Your agent will draft an MOU which stands for Memorandum of Understanding and is also known as a Form F. You will review the MOU and then both parties will sign the contracts along with handing over the 10% deposit cheque.
7 The sales progression process.
If the buyer is purchasing with a mortgage then the bank’s involvement will be needed. A bank valuation on the property is required and the buyer will need to obtain the final offer letter from the lender, which secures the chance of a mortgage. If the seller has a mortgage on the property, the buyer is required to settle the seller’s mortgage in full prior to the No Objection Certificate (NOC) application. If this is the case, make sure that once both parties have signed the MOU, the seller requests a mortgage settlement statement from his/her bank as this can take up to 2 weeks. (This process can vary depending on bank, but we would factor in an average of 6-10 weeks)
8 Applying for the NOC.
All parties will meet at the offices of the developer to apply for a No Objection Certificate (NOC) to sell the property. The developer will usually issue the NOC against a payment of a fee (AED500-5000 depending on the developer) once the developer is satisfied that any amount due the developer in the form of service charges have been settled in full along with ensuring that any modifications the seller may have made have been completed as per the developer’s guidelines. Usually someone from the developer’s office will come and view the property once an NOC is applied for. Certain developers will also require a refundable deposit made by the buyer that is only returned once the buyer presents the new title deed at the developer’s office and their records are updated. (Processing can take up to 5 working days)
9 Transferring of ownership.
Once the NOC is issued, all parties are able to go to the office of the Dubai Land Department to officially transfer ownership. The DLD will insist on payment of the purchase price in the form of a manager’s cheque made payable to the seller on the date of transfer, along with manager’s cheques for the 4% transfer fee due to the DLD and an admin fee not in excess of AED 4,000. Once formalities are completed, a new title deed will be issued in the name of the buyer. At this time, the buyer will settle any overpaid service charges with the seller worked out pro rata.
10 RECEIVE KEYS AND MOVE IN
Frequently Asked Questions
In most instances, the transaction process goes as follows:
- Buyer chooses the property.
- Buyer and seller sign the sales and purchase agreement, where all the terms and conditions of the deal are mentioned: the purchase price, additional expenses (agency fee, transfer fee at the DLD, developer's fee, service charge refund, etc), the transfer date of the deal at the DLD, terms of payment and clearly-defined responsibilities and penalties for both parties in case they fail to uphold the conditions set out in the agreement.
- On signing the agreement, the buyer pays the deposit. This is usually 10% of the purchase price.
- The seller applies for a no-objection certificate (NOC) from the developer in order to sell the property. The NOC is required for the transfer process at the DLD.
- Once the NOC is ready, the buyer and seller can transfer the property and register it on the buyer's name. Usually, payments need to be made at the time of registration.
The regulations, governing the relationship between the landlord and the tenant, are defined in Law No. 26 of 2007. As per the law, any property owner in Dubai can rent out their unit. Usually, the rental period is one year (extensions are possible).
A property owner can appoint a licensed management company to manage his/her property, in which case the firm bears all responsibility of communicating with the tenant.
The average net income (after paying the service charge) is 5%-10% per year, depending on the type of property, geographical location or service charge price. The more exclusive and expensive properties usually bring in less rental income in percentage even though the rent is higher.
For the most part, real estate deals are made through agencies in Dubai (like everywhere else in the world). Realty agents are market experts and have up-to-date information on the industry and can help both property owners and buyers or tenants find a deal that suits them best. That being said, it is possible to negotiate a deal without an agency.
As per Law No. 85 of 2006 regarding the regulation of real estate brokers, these are some of the requirements for brokerages in the emirate:
- Have an appropriate trade license from the Dubai Department of Economic Development;
- The brokerage company and all its brokers must be registered with the RERA. Upon registration, agency is given an Office Registration Number (ORN) and its agents are given a Broker Registration Numbers (BRN);
- In order to be registered with the RERA, all agents of a brokerage company need a certificate from the Dubai Real Estate Institute (DREI) and have to pass a professional test, administered by the RERA.
- Brokers are required to comply with a Code of Ethics, published by the RERA.
The Dubai market is a melting pot of cultures and it can be a daunting task to those new to the country. It is difficult to trace down who is responsible in the event that something goes wrong in a property deal. Real estate agencies act as intermediaries between buyers and sellers and as such, there is a clear account of who is responsible and both buyer and seller knows where to turn when something goes wrong. Not all agents in the market are registered and it is essential that homeowners and tenants make sure that they are dealing with a registered agent to safeguard their own assets.
As intermediaries, agencies are ethically obliged to work out a deal that is in the best interest of both parties. For example, the agency is responsible for collecting a deposit from the buyer and holding on to it until final payments are made to the seller. The buyer can be assured that he/she will receive the deposit back if something goes wrong with the deal on the part of the seller. Meanwhile, the seller is assured that they will be compensated if the deal is cancelled on the buyer's part.
Once a property has been handed over to the purchaser, it must be registered in the name of the purchaser at the Dubai Land Department (DLD). The property owner can appoint someone with a notarised Power of Attorney to register their property and receive a title deed if they are unable to do it themselves.
Off-plan property needs to be registered in the interim register through the Oqood system on receiving the initial sale contract. When the property is ready, a title deed will be issued in the name of the homeowner.
A registration fee of 4% of the property value needs to be paid along with a fixed amount for document preparation.
Earlier, ownership of property in Dubai was restricted to citizens of the UAE. However, in 2006, the government passed Regulation No. 3, determining designated areas where non-citizens can own property. In these areas, foreigners are permitted to buy property on freehold ownership. Major freehold properties are available in most parts of 'new Dubai,' such as in Dubai Marina, Palm Jumeirah, Jumeirah Lakes Towers and Emirates Hills.