10 Key Factors to Consider Before Purchasing a Property in Dubai
Dreaming of owning a property in Dubai? Whether you are setting your sights on an apartment, a villa, a flat, or any other form of real estate investment, there are several things you need to keep in mind before closing the deal.
To help you make an informed buying decision, we will explore the ten key factors that must be considered when purchasing a property in the city.
1. Where is it Located?
If there are three things that define the price of a certain property, these are none other than location, location, and location. Hence, this is the key element that you need to take into account.
Basically, the locality that suits you completely will depend on your requirements and preferences. Does it have to be close to your workplace or your children’s school? Do you want to live somewhere close to the beach? Do you want a community that offers beautiful landscapes and greeneries? Once you have determined your purpose of buying a property in Dubai and your specific requirements, the search will become easier for you and your trusted realtor.
Below are some guides that will help you out.
- Affordable Locations – Want to go for an affordable area? There are several options that you can choose from under this category, and these include Media production City, Dubai Sports City, Jumeirah Village Triangle, Jumeirah Village Circle, Discovery Gardens, Dubai International City, etc.
- Developed Locations – If your main purpose in investing in Dubai’s real estate market is to get a steady and decent rental income, then purchasing a property in already developed areas is your best option. You can never go wrong in locations such as Palm Jumeirah, Jumeirah Beach Residence (JBR), Jumeirah Lakes Towers (JLT), Dubai Marina, etc.
- New Locations – Are you planning to kill two birds with one stone? Then invest in a community like Dubai South, as it offers properties that are affordable yet will increase in value in the future. With the increasing population in Dubai, several areas in this new district are anticipated to have a high housing demand five to ten years from now.
2. Master Developer
Let’s say that you have already determined your requirements and narrowed down your search to a few areas or communities. The next step is understanding how your selected communities work and how well-maintained they are. To make this possible, it’s imperative to check out the master developer’s track record.
Meet the Leading Master Developers in Dubai
Among the biggest names in the region include Damac Properties (Akoya Oxygen, Damac Hills, etc.), Emaar (Dubai Creek Harbour, Downtown Dubai, Dubai Marina, etc.), and Nakheel (Jumeirah Village Triangle, Jumeirah Village Circle, Palm Jumeirah, etc.)
In the long run, your house’s value in Dubai will generally depend on the master developer. Of course, if the master developer has an outstanding reputation and the community is properly maintained, it will always end up as an attractive choice for property buyers and investors. This means to say that as a landlord, there will be more tenants interested in renting your property, and as a seller, there will be more buyers willing to purchase it. Hence, before deciding to venture into real estate in Dubai, take some time to research and get to know the different master developers here.
3. Project Developer
Unlike several regions worldwide, a developer does project development in Dubai. Hence, there are designated areas where you can purchase a piece of land and build a house with your own taste (applicable to villas only).
A developer pertains to a firm that constructs a project such as a cluster of townhouses / villas or a commercial / residential building. Once you have selected the location and confirmed which master developer is the best, choose the project. Keep in mind that a master developer is mainly responsible for the community’s construction and maintenance, while the project developer is accountable in constructing and maintaining the building.
Upon completion of the building, the maintenance company enters the picture. Typically, they are selected by the developer for the first year and then, by the Owners’ Association. However, if the quality of the finished project is not up to the mark, the maintenance company will be less effective.
This is why it is vital to discuss with your realtor in detail which developer will best meet your needs and requirements. Purchasing a property from a bad developer will take a huge toll on your revenue. Worse, there are slim chances to sell it at an appreciated price in the future.
4. Maintenance Company
The maintenance company is responsible in giving justice to the architectural marvel that you have invested in. If the otherwise happens, then the Owners’ Association can terminate its contract and switch to a new company. However, all the owners must be united to make this possible.
To avoid any issues concerning the maintenance of your property, it’s important to verify the reputation of the firm in charge of your building. Getting in touch with your realtor is the key to keep troubles at bay when it comes to making the final decision, as they are your best source of information.
5. What’s the Age of the Building?
Since Dubai is a young city, most of the developments here are not over 15 years old. What’s more, it’s growing in a rapid pace, so there’s always a new development being launched.
Enjoying a high level of interest from both local and foreign investors, the off-plan property sector of the region has always been in demand. Typically, people purchase off-plan properties in Dubai because such developments are more affordable and offered with favourable payment plans. However, this will again boil down to your specific needs and requirements.
If you are eyeing on a ready property in the city, then an off-plan property is not the right one for you. In this case, it is essential to know the age of the building, as this will give you an idea of what to expect from your purchase.
Here in Dubai, the developer is mainly responsible for any malfunctioning in the unit for up to one year from the completion date. They are also liable for the structural damages for a maximum of ten years from its date of completion.
So, what does this mean? If you are purchasing a unit in a new building, you are most likely to be covered under this warranty. However, if the building is more than a decade old, you as the owner will be liable for any repair work that may be necessary inside your apartment.
It really doesn’t matter whether you choose a new or old development. Majority of the buildings in the city are constructed and maintained to high standards. Hence, whichever option you settle with, you will never make a bad decision at all.
6. What’s the Condition of the Property?
In several countries worldwide, the seller is responsible for providing the buyer with an inspection or snag report, which is designed to help the owner understand the property’s actual condition. However, this is not commonly practised in Dubai.
If, for instance, you as a buyer need to get an inspection done, you must do it on your own expense. You can either do it yourself or entrust the job to professionals.
From a consultant’s point of view, it would be best to perform a detailed snagging report, as this will enable you to figure out and understand the defects in the property. You can also use this information when it comes to price negotiation.
7. Price Assessment
This is the real deal when it comes to purchasing a property in Dubai. Hence, it’s important to know how it works.
As a foreign investor coming from an extremely costly real estate market like Hong Kong or Singapore, you might find the prices in Dubai affordable. However, take note that it’s not the right standard of comparison. It’s vital to seek advice from a seasoned professional to have a better understanding of the real value of the property.
Say, for instance, you have decided to take a mortgage for the purchase. The bank, will either way, have the property evaluated. Therefore, you will be able to judge whether the price that you have been offered is ideal or not.
Checking out the recent sale records of similar properties in the same area or building is one of the best ways to get an idea about the right value of the property. However, this information is not available to the general public in Dubai. The great thing about working with a reputable realtor is that they will have access to authorised platforms from where they can obtain the actual sale transaction and provide you with a more realistic assessment of the property that you are setting sights on.
8. Financing Options
For years, cash investors have been playing a huge role in Dubai’s real estate market. However, the game is changing now with the increasing number of end-users purchasing properties and the growing number of finance buyers.
This trend will most probably continue given that more and more business owners and expat workers in the city are getting inclined towards purchasing a property instead of renting one.
According to the guidelines set by the Central bank of the UAE, there are three major categories of home finance products. These are as follows:
- Housing Loan for UAE Nationals – Citizens of the UAE (Emiratis) can get up to 85% LTV on their first real estate purchase. This means to say that they are required to pay only 15% down payment.
- Housing Loan for UAE Residents (Expats) – Are you an expat? Then that means you can obtain up to 75% LTV on your first real estate purchase. In this case, you need to pay 25% down payment.
- Housing Loan for Non-Residents – Even if you’re not a resident of the UAE, you still have a chance to get a mortgage in the country. Banks can offer you a maximum LTV of 50%. Hence, you need to pay 50% down payment.
House mortgage is an ever-evolving product in the UAE, which is why more options and flexibility in terms of home finance products are anticipated in the future. One such example is the home finance product offered by a finance firm. If you’re already an owner of a property in Dubai, you can utilise its rental income to pay off your second mortgage. This is one of the latest initiatives, as banks in the UAE never took into account rental income while providing mortgage approval to clients.
Take note that banks in the UAE normally charge a home loan with 3% to 5% interest.
Obtaining pre-approval from a bank will give you an idea of the amount they are willing to lend you. By knowing your spending limit, you can better refine your property search in Dubai’s real estate market. Therefore, you and your realtor can save time and enjoy a smooth process.
9. Title Deed Transfer
The beauty of real estate in Dubai when it comes to title deed transfer is that it can happen in as quickly as an hour.
Here are the step-by-step procedures:
- Title Deed Validation – Your realtor will do this for you. Ensure to obtain a copy from the seller and have it validated by visiting the website of the Dubai Land Department (DLD).
- Sign the Memorandum of Understanding (MoU) – Upon validation of the title deed and agreement on the selling price and other things between you and the seller, you can sign the MoU, which is automatically registered with the government.
Before deciding on a date when the transfer should transpire, you and the seller need to provide a 10% security cheque to the realtor as a guarantee.
- Transfer / Trustee Office Visit – Once everything is set, you and the seller will meet along with your realtor in the trustee / transfer office where the officer will collate the documents from both of you to validate your identities and the purchase terms.
As a buyer, you will pay the seller in the form of a manager’s cheque, which will be further verified by the officer. Moreover, you are required to make a manager’s cheque in the name of DLD for 4% of the total sales value (transfer fee).
- Title Deed Issuance – Upon confirmation of the trustee officer and the completion of all legalities, they will request for an ownership change to DLD. Relax and wait in the trustee office for almost half an hour while enjoying a refreshing Arabic tea and some snacks until the new title deed is printed and ultimately handed over to you.
- What are the Associated Costs?
Now, let’s determine the other costs that can be associated with your property purchase in Dubai.
- Price of the Purchase – This is the first cost that you have to bear as a buyer. You can pay for it either through bank finance or in full in the form of a manager’s cheque. If it’s a mortgage, the bank will make a part payment, and their representative will be present during the title transfer.
- Transfer / Registration Fee – This is payable to DLD and is fixed at 4% of the property’s agreed sale price.
- Valuation Fee – You will be charged AED 3,000 if you plan to take a mortgage from the bank. However, this amount may vary from one bank to another.
- Loan Processing Fee – Aside from the valuation fee that is payable to the bank, you also need to pay for the 1% processing fee on the amount of loan that you’re taking.
- Mortgage Registration Fee – You also need to pay 0.25% of the property’s purchase price, which is applicable if you’re getting a mortgage.
- Trustee Fee – If the property’s sale price is equal or below AED 500,000, you will need to pay AED 2,000+VAT. Meanwhile, if it’s above AED 500,000, you have to pay AED 4,000+VAT.
- Maintenance / Service Fee – When you’re done paying for the brokerage fee, pay the yearly service fee to the owner’s association management firm, which takes care of the management and maintenance of the building’s common areas.
- Realtor / Brokerage Fee – As a standard practice in Dubai, you need to pay 2% of the property’s sale value. According to DLD, the brokerage commission depends on the agreement between the broker and the client.
- District Cooling – Is there a district cooling firm providing AC and cold water services in your building? Then, you also need to register with them. This can cost you approximately between AED 2,000 to AED 4,000.
- DEWA Registration – If you have purchased an apartment, then you need to pay roughly AED 2,400. Here, AED 2,000 will be refunded as a security deposit.
Meanwhile, if you have purchased a villa, the cost of DEWA registration will be around AED 4,500 (of which AED 4,000 will be refunded as a security deposit.
- Property Management Fee – Aren’t you residing in Dubai? Then you can hire a property management firm to manage your villa or apartment in your absence. Usually, the fee for such management firms starts anywhere from 5% of your yearly rental income.
- Home Insurance – This is an optional expense, but can serve its purpose when you least expect it. Therefore, investing in a good insurance policy is highly advisable.
There you have it. However, if you are not a fan of details, then here’s a blanker figure—the extra costs involved in purchasing a property in Dubai will be anywhere from 6.5% to 9% of the property’s total purchase value.