Buying property in Dubai: what you need to know
Ukrainian investors are actively interested in the growing real estate market in Dubai. In 2023, prices for villas in this emirate increased by almost 35%, for apartments and land plots - by about 13%. The number of transactions is constantly increasing, as the profitability from the resale of new real estate and rental housing is really high. Let's consider all the important nuances that you need to know when buying a house or apartment in Dubai.
Why buy real estate in Dubai
The purchase of real estate in the UAE, in particular in Dubai, provides quite a few advantages for the investor. Here are some of the main advantages that gives the purchase of housing in one of the most popular emirates:
increase in the value of the purchased real estate - for 10 years, housing prices in Dubai have increased by 1.5 times, so this is a good way to preserve and increase personal funds;
income from rental housing - having bought apartments, you can rent them to tourists or foreign professionals and receive from 5-8% per annum;
no property and income taxes - in the UAE there is no annual property tax, income tax, gift tax and capital gains tax on the sale of housing;
obtaining a resident visa - when buying an apartment or villa worth 750,000 dirhams or more, you can apply for a resident visa.
Resident visa gives the right to optimize taxes, open an account for international transactions in a state bank, use of state medicine in the country and international schools for children. The term of validity of the residence permit depends on the value of the real estate. To obtain a resident visa for a period of 10 years, you need to buy a property worth AED 2,000,000 or more.
Who can buy real estate in Dubai
About 20 years ago, foreigners had no right to buy real estate in Dubai. But the legislation of the country has changed and now there are no more such strict restrictions for foreign investors. Citizens of all countries, including Ukrainians, have been able to freely buy real estate in the UAE. But there are some nuances and restrictions.
Regardless of his citizenship, a foreigner can buy housing in Dubai, but in some areas there are restrictions on the form of ownership of the object. Depending on the selected location in it, you can buy a property or in possession of the rights of the lease, or in full ownership.
If leasehold ownership is selected, it applies only to the property and not to the land underneath it. There are three options for leasehold tenure:
99-year leasehold - gives almost the same rights as full ownership;
ususfructus (ususfructus) for 99 years - does not allow redevelopment or alterations;
musataha (musataha) for a period of 50 years - allows redevelopment or redevelopment.
If the decision is made to buy real estate in full ownership, the buyer receives ownership of both the object and the land under it without restrictions on time. It is this purchase option that allows you to apply for a resident visa.
In full ownership is allowed to buy real estate only in specially designated areas. There are about 50 such areas in Dubai. The most popular Freehold-zones are Dubai Marina, Business Bay, Emirates Hills, Jumeirah Islands, Downtown Dubai, Arabian Ranches, Palm Jumeirah, Damac Hills and others. To buy real estate in Dubai investor is enough to present a passport.
Only citizens of the Arab Emirates and Gulf countries (Bahrain, Qatar, Kuwait, Oman, Saudi Arabia) can buy real estate in full ownership in any part of Dubai and the UAE in general.
What is the average cost of real estate in Dubai
The cost of residential real estate in Dubai differs for different areas of the emirate. Also the prices are influenced by the type of object and its characteristics. The average cost per square meter of housing in Dubai is $3,175. The median price of apartments - 450 000 dollars, villas - 630 000 dollars.
The highest prices for square meters are recorded in Downtown Dubai: almost $6,900/m². The most affordable real estate options can be found in Business Bay: here a square meter costs about 4,900 dollars. Other popular areas: Palm Jumeirah - 6850 dollars for 1 m², Dubai Marina - 6600 dollars for 1 m², Dubai Creek Harbour - 5100 dollars for 1 m².
Palm Jumeirah recorded the highest average cost of apartments - 1 300 000 dollars. The price of real estate is 3 times higher compared to the average cost of apartments in Dubai Marina and Business Bay. The demand for housing on the artificial island is several times lower than in the central districts. The average cost of villas on the secondary market on Palm Jumeirah is also the highest and is 4.5 million dollars.
What taxes and fees when buying real estate in Dubai
When buying an apartment or villa in Dubai, there are a number of mandatory fees that fall on the shoulders of the buyer or buyer and seller. Here are the cost items to consider:
title transfer tax - 4% (often paid by the seller and buyer in equal installments);
administrative fee for paying the tax - 147 dollars;
registration fee - $545 (transaction amount less than $137,000) or $1,090 (transaction amount more than $137,000);
administrative fee when issuing a certificate of registration of ownership rights - 68 dollars.
By law, you can buy or sell real estate in Dubai only with the help of a realtor who has a license to provide such services. If the property is purchased in a new building, the realtor's services are paid for by the developer. In case of buying an object on the secondary market, the buyer and the seller can split the agent's commission in half.
How much it costs to maintain real estate in Dubai
Investments in residential properties in Dubai are interesting and the fact that the investor does not have to pay taxes, in particular, the annual property tax. Also, if the housing is bought for rent, the landlord will not have to pay income tax.
The maintenance of the property is basically just paying for utilities. For water, gas and electricity, the owner pays an amount depending on how much electricity, gas and metered water they have used. Also the owner must pay an annual fee for the maintenance of the house, which includes maintenance of the elevator and swimming pool, current repairs, cleaning, security. The size of this fee varies from 15 to 60 dollars per square meter per year. Internet, telephone and television costs about 80-120 dollars a month.
The cost of housing maintenance is influenced by its location and class. If a studio is bought, its maintenance will cost the owner about 850 dollars a year. Spacious apartments are more expensive to maintain - about 1500 dollars.
Which is the best neighborhood to buy property in Dubai
The most popular areas of Dubai, in which the bulk of real estate deals are made, are Business Bay, Dubai Marina, Downtown Dubai, Dubai Jumeirah and Dubai Creek Harbour.
When choosing a neighborhood, you should not only focus on which parts of the emirate are the most popular. It is important to take into account the purpose of purchase, budget, personal preferences, etc. If apartments are bought for further renting to tourists or professionals on contract, it is worth paying attention to Al Mararr, Jabal Ali First, Business Bay, Al Warsan First, Al Barsha South Fourth, Abu Hail, Dubai Marina. These areas of Dubai have the highest number of rental transactions.
If you are buying a property for personal use, you need to consider your lifestyle. The following neighborhoods are ideal for families with children: Arabian Ranches, Al Barari, Jumeirah Lake Towers, Emirates Hills, Mudon, Jumeirah Beach Residence and others. These are comfortable and green parts of the emirate, where it is not difficult to find a quiet environment to live with a child.
Couples and singles may like to live in Dubai Marina, JLT, Dubai Hills. Here you can easily find studios and small apartments, and in most cases you can enjoy beautiful views of the city. All of these neighborhoods have good infrastructure: cafes, gyms, stores, nightclubs and other entertainment venues.
If your budget is limited, you should pay attention to such areas of Dubai as Discovery Gardens, International City, Deira or Jumeirah Village Circle. Here you can buy small mid-range apartments.
You can buy a villa in such popular neighborhoods as Sports City, Nad Al Sheba 3, Wadi Al Safa 5, Jabal Ali 1, Dubai Investment Park 1. About 40% of all sales of houses in the emirate falls on these areas, so here you can look for housing for yourself and for the purpose of investing funds.
Can you buy real estate in Dubai in mortgage or installments
Foreigners, including Ukrainians, can buy residential real estate in Dubai with the help of various financial instruments, which include mortgages and installments. The UAE government provides foreign citizens with the opportunity to purchase housing on certain terms, and many banks have specialized programs for non-residents.
Buying by installments
Installment payment is one of the most popular ways to buy apartments and villas in Dubai. This option is offered by many developers. What are the advantages of installments when buying real estate in Dubai:
No interest;
flexible payment terms;
issuance of resident visa upon readiness of the object and payment of 50% of the cost;
the ability to resell the object upon payment of 40% of its value;
no assessment of the buyer's creditworthiness;
safe settlements between the developer and the buyer.
The main stages of buying real estate in installments - is the selection of the object, the conclusion of the contract of sale, making a reservation in the amount of 5% and timely transfer of funds according to the schedule of payments. Make installments in Dubai can every adult and solvent citizen of any country.
Buying a mortgage
You can also buy a home in Dubai with a mortgage. But there are restrictions on the types of real estate. Only properties located in freehold zones can be mortgaged. It is also obligatory that the construction has already been completed or the commissioning of the object is not more than 2 years from the date of conclusion of the mortgage agreement.
Residents can count on more loyal mortgage terms than non-residents. So, depending on the status of the borrower, the amount of the loan may be more or less. But it is also convenient that you can buy real estate in a mortgage in Dubai not only through the state banks of the UAE, but also through European banks, which allows you to find the most favorable conditions.
Requirements for borrowers to apply for a mortgage in Dubai:
Age - 21-65 years;
proven income - from 10000-15000 dirhams;
positive credit history;
the total amount of credit obligations does not exceed half of the monthly income;
employment in a company in the UAE (for residents), freelancing with registration or own business in the Emirates.
The mandatory requirements do not include having your own real estate (not mortgaged) in the UAE, but it can be a significant plus. A non-resident borrower is also required to take out life insurance.
Mortgage terms differ for residents and non-residents in terms of the size of the down payment. For the former, it is smaller and is up to 10% of the cost of housing. Non-residents must immediately pay 20-30% of the value of the object. The average mortgage rate ranges from 4 to 7% per annum. Mortgages can be issued for terms from 1 year to 25 years.
How the purchase of real estate in Dubai takes place
The purchase of residential real estate in Dubai takes an average of 4-6 weeks, depending on the situation of the borrower, the method of purchase of housing, the peculiarities of the selection of the object. The transaction necessarily takes place with the participation of a realtor. The lawyer monitors the cleanliness of the selected real estate and the terms of the contract of sale.
How is the purchase of real estate in Dubai step by step:
Selecting a property. Depending on the buyer's location, it is possible to choose an object both locally and remotely. If it is a new building under construction or a house in the project, there is no need to be in the UAE at all, as it will be possible to study the housing only by brochures.
Conclusion of a preliminary contract of sale. The parties to the transaction conclude an agreement, in which the address and area of the real estate object, the amount of the transaction, terms and conditions of payment, obligations of the parties to pay related fees, the date of delivery of the object under construction, etc. are fixed.
Signing the sales agreement and making the down payment. The parties sign a "Contract F" (Memorandum of Understanding), which is valid for 30 days if the home is purchased on the secondary market. The buyer makes a down payment of at least 10% of the transaction amount.
Obtaining a no-objection certificate. If the property is purchased with a mortgage, the buyer must obtain a certificate of no objection from the bank. The investor also needs a payment slip from the developer and a certificate of transfer of the property.
Registration of ownership. The buyer deposits the balance of the amount into an account. The parties register the transaction with the Dubai Land Department. After the transfer of ownership is registered, the seller receives payment.
If the property is purchased during the construction phase, the "Contract F" and the no-objection certificate are not needed. The investor only needs to sign the original contract of sale, which is re-issued upon completion of construction.
What are the pitfalls when buying real estate in Dubai
When buying residential properties in new buildings in Dubai, there may be pitfalls that the investor did not suspect, so it is important to be careful, and it is better to enlist the support of a lawyer.
So, when buying real estate in a new house for the purpose of further resale should take into account that the developer may prescribe in the contract restrictions on the sale of apartments before the commissioning of the house. The developer may specify that the investor must pay, for example, 30-40% of the value of the object to obtain permission for resale.
There are cases when the developer set a price barrier and did not allow investors to resell apartments at prices below a certain level, so as not to reduce the rate of sales of other properties in the same building.
If the property is bought for the purpose of renting out, the investor should make sure that the rent stated by the developer corresponds to the market indicators. It happens that construction companies "subsidize" the rent for 1-2 years, and after hitting the open market, the rental value of apartments falls.
To avoid these and other possible pitfalls when buying real estate in Dubai, it is important to make sure of the reliability of the seller and carefully study all the clauses of the contract before signing. With the support of an experienced realtor and lawyer, you will be able to avoid unpleasant moments and invest safely and profitably.
