How to process the purchase of a property?
lifestyle
PROPERTY
IN THIS ARTICLE:
Every year, property in Dubai is becoming more and more sought after. In this article, we have written answers to the most common questions that arise for clients who are interested in buying property.
01
How to buy property?
The first thing to determine is the type of property (flats, townhouses or villas). It is important to note that foreigners are not allowed to buy property in every area. Secondly, you must have identity documents and a visa (you can get a tourist visa stamped at the airport). You do not have to hold any kind of residence permit in order to buy a property.
02
Payment methods
Is it possible to pay in cryptocurrency?
Yes, but not all companies provide such an opportunity. A notable major real estate developer, which sells property for Bitcoin and Ethereum cryptocurrencies, is DAMAC.
Is it possible to pay from a Russian account?
Yes, it is possible, however there are now certain complications with regards to this: your Bank should not be on the sanctions list. Furthermore, the Bank must have the ability to make a transfer via SWIFT.
03
How to check the property?
There is an official land department app — Dubai REST. You can check there:
- Counterparty company license (only licensed brokers can transact).
- Project completion status (if buying a project).
04
What are the benefits of buying property in the UAE?
No property taxes
There is no property tax in the UAE. However, there is a fee payable on ownership change. Each emirate establishes its own amount. For example, in Dubai it is 4% of the purchase price. This fee is usually paid by the purchaser. In addition, there are administrative fees for the ownership registration.
Property ownership is unrestricted in free zones
With a freehold property, you become the rightful owner of the property and can dispose of it at will: resell it, rent it out on long-term (multi-year) and short-term leases, give it away as a gift or even dispose of it. This right will also be passed on to your heirs.
Transaction security and control by the authorities (Dubai Land Department)
The authorities are interested in foreign buyers and new investment, so they are extremely careful to ensure legal compliance. Additional guarantees are provided by large developers, who are also involved in the deals.
Possibility of obtaining a residence permit after purchasing a property
It is possible to obtain a residence visa if the value requirements are met:
This visa can be extended an unlimited number of times, while continuing to own the property and comply with the UAE laws.
The property can be owned by either a man or a woman.
Important notice: it is recommended that after the property acquisition it is necessary to make a will. Otherwise, the property will be distributed under Sharia law in the event of death.
- For a 5-year visa — the minimum investment is $ 1.35 million / AED 5 million.
- For a 10-year visa — $ 2.72 million / AED 10 million.
This visa can be extended an unlimited number of times, while continuing to own the property and comply with the UAE laws.
The property can be owned by either a man or a woman.
Important notice: it is recommended that after the property acquisition it is necessary to make a will. Otherwise, the property will be distributed under Sharia law in the event of death.
READ IN THE KNOWLEDGE BASE:
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05
Property acquisition in the UAE requires attention to detail:
Purchase tax on secondary housing
Tax must be paid on the purchase of property in the second-hand market. The amount depends on the emirate. For example, in Dubai it is 4% of the purchase price. If a pledge is made, a pledge registration fee of 0.25% of the purchase price is charged. This tax is imposed on the buyer and not the seller.
An intermediary (agent) is mandatory
The purchase of a flat, a plot of land or other property transactions must always be accompanied by an intermediary. On the one hand, this ensures the integrity of the transaction with the seller and protects against fraudulent manipulation, while on the other hand, it increases the costs of the purchase process.
Risk of buying rented property rather than ownership + prevalence of fraudulent agents
You only need to rely on trusted contractors in this case. We are ready to introduce you to reliable agents.
06
Share agreement analog
Is it possible to buy a property under construction?
Yes, it is possible. This is so-called off-plan property.
Off-plan properties have a number of special features compared to completed properties. The most important of these include the possibility of taking advantage of a post handover payment plan. It is an instalment plan directly from the developer. The difference between a mortgage and a payment plan is that you do not have to pay interest to the bank, it is quick and easy to arrange. The terms of the payment plan may vary from project to project.
The buyer will in most cases have to pay a reservation fee (5−10% of the price) and a down payment (depending on the developer’s terms, this may be 5−30%). The remaining amount is split over 2−5 years. Often the date of the last payment coincides with the transfer of ownership of the property to the investor.
It is possible to take out a mortgage when buying off-plan property, according to Act No. 14 of 2008, provided that 50% of the property’s value has been paid.
The Law No. 8 on Guarantee Accounts for the Construction of Property in Dubai was issued in 2007. Its purpose is to protect the interests of investors purchasing property during the construction phase. All funds received from project buyers and investors will be deposited in a dedicated bank account (escrow) as required by this law. They can only be used for construction work. The possibility of using the funds is opened up in instalments after specific construction phases have been completed.
In addition, to protect buyers before the project starts, the developer is required to set aside at least 20% of the estimated project cost in this account. These funds can be used for any stage of construction work.
Off-plan properties have a number of special features compared to completed properties. The most important of these include the possibility of taking advantage of a post handover payment plan. It is an instalment plan directly from the developer. The difference between a mortgage and a payment plan is that you do not have to pay interest to the bank, it is quick and easy to arrange. The terms of the payment plan may vary from project to project.
The buyer will in most cases have to pay a reservation fee (5−10% of the price) and a down payment (depending on the developer’s terms, this may be 5−30%). The remaining amount is split over 2−5 years. Often the date of the last payment coincides with the transfer of ownership of the property to the investor.
It is possible to take out a mortgage when buying off-plan property, according to Act No. 14 of 2008, provided that 50% of the property’s value has been paid.
The Law No. 8 on Guarantee Accounts for the Construction of Property in Dubai was issued in 2007. Its purpose is to protect the interests of investors purchasing property during the construction phase. All funds received from project buyers and investors will be deposited in a dedicated bank account (escrow) as required by this law. They can only be used for construction work. The possibility of using the funds is opened up in instalments after specific construction phases have been completed.
In addition, to protect buyers before the project starts, the developer is required to set aside at least 20% of the estimated project cost in this account. These funds can be used for any stage of construction work.
Advantages
- Loyal pricing policy. The average cost of a property under construction is almost 2 times lower than that of a completed property. At the same time, the market value of your asset may increase after each stage of construction work is completed.
- Payment plans. Many local developers offer investors an interest-free hire purchase in 60/40, 30/70 and other schemes.
- Possibility of redevelopment by prior arrangement with the builder.
- Possibility to resell the property prior to completion.
Risks
- Delayed completion dates. This is one of the most likely risks when buying off-plan properties. A project construction is not always on schedule. You should choose reliable developers with a good business reputation to protect yourself from possible delays. It is equally important to make sure that the contract specifies the timing of the key stages of the work and a specific date of completion.
- The occurrence of an unfavorable situation on the property market. The purchase of a home under construction is a long-term investment that will only begin to pay off in a few years. The real value of your asset may fall if market conditions become unfavorable. This means that the actual market value of the home will not cover the cost of your investment.
- The finished facility does not conform to the stated plan. You need to carefully choose a developer with a good reputation and a track record of quality projects to secure your investment and get a truly high quality property.
- Lack of opportunity to resell the property. Currently, many developers require the investor to pay a certain proportion of the declared property value before they will authorise the resale to a third party. Should you initially intend to make a profit by selling the home at a later stage of construction, you should check with the developer about the minimum payment threshold after which a new sale transaction can be made.
- Project closure. To minimise the risks of closure and freezing off-plan construction projects, the emirate government issued Law No. 8 of 2007, The Construction Projects Guarantee Account in the Emirate of Dubai.
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