Buying a home in Dubai for the first time: What you need to know
Taking the leap from tenant to homeowner is an intimidating step. First-time buyers are faced with endless choices and a whole new lexicon as they search through the property for sale in Dubai.
Read through this helpful guide for first-time homebuyers to learn what to expect from the start of your search until the moment the keys in your hand. You’ll find all of the pertinent terms, steps and sources that anyone hoping to buy a property in Dubai should know.
By the end of this guide, you’ll know about:
- The types of property for sale in Dubai
- How to find a trustworthy real estate agent
- How to get a mortgage
- The hidden homebuying fees
- How to submit an offer
- Which government agencies you’ll encounter
- Finding a community that fits your needs
TABLE OF CONTENTS
- Why Buy in Dubai?
- Types of Property Available
- Set a Budget & Finance Your Dream Home
- Choose the Perfect Property
- Work with a Trustworthy Estate Agent, Broker or Developer
- Place an Offer or Submit a Reservation
- Key Facts for Prospective Investors
- Dubai Welcomes Expat Buyers
- First-Time Homebuyers FAQs
Why buy in Dubai?
In a relatively short period of only 50 years, Dubai has become a global hub. What was once a small village on the Arabian Gulf is now a bustling metropolis––one that's constantly expanding––established at the crossroads of the world.
While the majority of Dubai residents are renters, buying a home here is an option that saves and even makes money over time.
Today, Dubai connects a diverse population of approximately 3 million people in the space of less than 1,300 square kilometres. The population of the United Arab Emirates is projected to increase by around 1.5% each year. The space available for development, however, remains finite.
This means it’s likely that any property you purchase in Dubai will accrue value over time, whether you plan to use it as a personal residence or an investment property.
But is now the right time to take the plunge?
In short, yes. Home prices have already risen since their low point in 2020, during the height of the pandemic. Between January and May 2021, Dubai's property market investments totalled AED 36 billion, a 44% year-over-year increase, according to a report by the Dubai Land Department cited by ArabianBusiness.com
New residential projects in Dubai that had previously stalled due to the pandemic are now back in construction again. The resale market for existing properties has seen the most growth in the villa sector, with Dubai residents opting for more indoor and outdoor space.
This means that there is a range of exciting possibilities available to first-time homebuyers, whatever their budgets may be.
If you’ve been considering setting down roots here, now is the right time to plan out your purchase strategy.
Types of property available
There are three main types of property agreements in Dubai: Freehold, Commonhold, and Usufruct. You’ll need to determine what type of property best suits your needs, budget and long-term goals.
Freehold property is owned outright and has few restrictions. The owner can rent out, renovate, sell or pass this type of home and the land it stands on to successive generations.
There are specific freehold locations within Dubai designated for foreign ownership by the government. Areas like DAMAC Hills, Business Bay, Jumeirah Park and Downtown Dubai are all freehold property areas open to investment by expats from non-GCC countries.
Most freehold properties are plots of land slated for development. An interested buyer, particularly a foreign first-time homebuyer, will need to purchase a freehold property through a developer like DAMAC. Only government-approved developers are licensed to sell and build on these plots.
Commonhold property is similar to freehold but applies mainly to residential and non-residential units in apartment buildings.
Commonhold properties are similar to condominiums, where the property can be bought, sold, updated, or passed on as inheritance, but owners must also pay common charges towards maintaining public areas (such as elevators, lobbies and the grounds of the building) and the upkeep of amenities (like gyms and or pools).
Usufruct property is similar to leasehold property in the United Kingdom. Usufruct is a long-term lease ranging from 10 to 99 years for residential spaces and up to 50 years for commercial spaces.
There are more limits on what can be done with this type of property, though it may be rented out for profit without sharing any income with the original owner, akin to an approved sublet in a residential space.
The usufructuary can also alter or update the property, but at the end of the lease time, any upgrades made to it belong to the original owner, not the usufructuary. For example, if you buy a usufruct property and install an above-ground swimming pool, the original owner will not reimburse you for it and you will not be able to move it elsewhere when the agreement ends.
Buying your first home: Top steps to take
1. Set a budget and finance your dream home
If you’re a first-time homebuyer in Dubai, you’re probably wondering how to finance your purchase.
Setting a firm budget that takes added home-buying expenses into account is the first step. Most first-time buyers take out mortgages, though conducting all-cash transactions might be a possibility for some.
Saving up for the down payment
Dubai requires expatriates and foreign-born non-residents to make a 25% down payment on their first property purchases. UAE nationals are required to make a 20% down payment on their first property purchases. This down payment amount rises to 35% for expats and 30% for UAE nationals when the property costs over AED 5 million.
This initial cash deposit is usually the biggest hurdle for first-time buyers, but it’s not insurmountable.
If you have any debt, work on paying it off right away. Scale back on discretionary spending like dining at restaurants and subscribing to entertainment streaming services. Forgo holiday travel for a while. The savings will add up quickly and help you prepare for the financial commitment of homeownership.
Cash versus mortgage
Some foreign buyers choose to pay cash for their first property purchase in Dubai. This option offers a faster return on the investment and a stronger position at the bargaining table but requires a large up-front spend.
Mortgages allow first-time buyers more financial flexibility and liquidity while they pay for a new home but come with bank approval and an interest rate.
In the UAE, 15-year mortgages are the most popular option, but 25-year mortgages are the longest term available. Use an online mortgage calculator to figure out what type of home loan works best for you.
Mortgages are available to expat residents of the UAE between the ages of 21 and 65 years old. To be eligible for a mortgage, most UAE banks require a monthly salary of at least AED 15,000.
If possible, strive for pre-approval on your mortgage from a bank before you make an offer or submit a reservation for a property. Pre-approvals take approximately one to two weeks to secure and will last from 45 to 65 days, so be mindful of the timeline.
Gather all the necessary documents for mortgage approval
You’ll need all the documents listed below to secure a home loan. Even if you’re an all-cash buyer, it’s wise to keep them on hand when you’re preparing to purchase a property.
Don't forget about additional expenses
There are other fees you’ll incur during the homebuying process, too. Dubai Land Department, the government agency that regulates Dubai’s real estate sector, charges a 4% transfer fee plus AED 540 as an administrative fee for all properties.
There are also property registration fees, mortgage registration and mortgage processing fees, conveyancing fees (for filing the legal paperwork) and valuation fees for establishing a property’s value.
If you buy an off-plan property directly from a developer, there is an off-plan property fee known as the Oqood fee. If you’re buying property through a real estate agency or a brokerage firm, there will be an estate agency fee, too.
2. Choose the perfect property
The perfect property should combine the right location with desirable amenities at a suitable price for your budget. Here are some things to consider when starting any property search.
Resale versus off-plan
Resale properties are homes that have already been built. These may be sold by the current owner or by the property developer. Buyers looking for ready homes in well-established parts of Dubai often choose resale properties. Resale properties are generally more expensive than off-plan properties.
Buying off-plan property from a developer may require some wait time before it is ready to occupy, but not always. There are also recently completed homes and ready apartments for sale in Dubai with payment plan options for buyers hoping to move in quickly.
Off-plan properties are usually more affordable than resale homes and frequently come with financing incentives, two major bonuses for first-time buyers.
That said, it’s extremely important to work with an established and trustworthy developer if you pursue this path to first-time homeownership. Researching the developer’s past projects and current model homes will give you a sense of what to expect.
You surely know the saying, “Location, location, location.” It’s certainly one of the most important considerations for first-time homebuyers anywhere, not just in Dubai. But the perfect location differs if you’re in the market for a luxury home, family residence, holiday home or investment property.
First, search online and check social media for community pages and residents’ chat groups to see if the location is a good fit for you.
Then, make multiple visits to any prospective neighbourhoods during the day and at night––even during different seasons if you have time to spare in your home search––to get a true feel for the location.
Compare the benefits of various external and in-home amenities
Young couples establishing a family will require different amenities than retirees resettling in Dubai for their golden years.
External amenities contribute to a sense of wellbeing and enhance your lifestyle.
For example, playgrounds located within a short distance of your home make a big difference if you already have children (or plan to have them soon). Fitness enthusiasts should check any prospective properties for high-end gyms, while dedicated golfers and equestrians will want their facilities nearby.
Apartment dwellers looking to buy can find buildings with doormen and concierge staff situated close to premium boutiques and trendy restaurants. Those are external amenities, too!
In-home amenities like dedicated home-office spaces have become extremely important over the last 18 months, but open-plan layouts, chef’s kitchens, landscaped yards, multi-car garages and additional rooms for guests, children and in-home staff are all desirable features, too.
Consider your mode of transport and accessibility
Maybe you prefer to live in an area close to the Dubai Metro for convenience. Or perhaps you’d rather reside in a community that’s accessed by car for more privacy.
There is no correct answer. It’s simply a matter of personal choice for first-time homebuyers.
Drivers should take traffic and parking into account as well. Try a few test drives to determine the length of regular commutes at different hours.
3. Find your ideal community
Self-contained community living is on the rise in Dubai, with more residents choosing this type of environment when purchasing their first home.
That’s due to a variety of reasons. Planned communities offer more space and supportive services like schools, supermarkets, pharmacies and medical centres built into the infrastructure. There are also unique amenities designed specifically for residents.
Planned communities in Dubai vary in size and price range and include buildings like villas, townhomes, apartments or some combination of these three.
For some first-time homebuyers, a restful and relaxing community with plenty of parklands is a top priority. A serene community with like-minded R&R seekers, DAMAC Hills is where you’ll find the Trump International Golf Club Dubai alongside tennis courts, a football pitch, a cricket field, a skate park, stables, a vegetable and plant nursery, plus multiple children’s playgrounds and parklands totalling nearly 4 million feet.
DAMAC Hills 2
Others first-time buyers will enjoy communities with more high-intensity leisure pursuits. DAMAC Hills 2 (formerly known as AKOYA) features a water park with wave surfing, plus splash pads and water-centric playgrounds for children. There’s also a basketball court, a cycling track, a jogging track, a go-kart circuit, paintball facilities, a petting farm and an outdoor cinema that appeals to all ages.
4. Work with a trustworthy estate agent, broker or developer
The next step is finding a real estate agent that you can trust. Before you choose someone to shepherd you through the process, it’s important to understand their role.
Is a real estate agent the same as a real estate broker?
A real estate agent is someone who has been licensed by the Dubai government to buy, sell or rent property. Most estate agents deal in resale properties, meaning ones that have already been built and inhabited.
A real estate broker is someone licensed to buy, sell or rent property in Dubai who has also met additional training and licensing requirements. Real estate brokers may work alone or hire a team of agents to work for them.
How does a real estate developer compare?
A real estate developer plans and constructs structures, or in some cases, a broad array of facilities from stadiums to residential communities.
First-time buyers may contact a developer’s sales team directly to buy an off-plan property (i.e., buildings that are either unbuilt or partially built) but will still require the help of an estate agent to complete the purchase.
Check home listings and perform a RERA check
Cast a wide net with a web search for properties in your preferred areas. You’ll notice that some real estate agents’ and brokers’ names come up more frequently as you narrow down the search.
Agents usually have a specific sector of the market they deal with, such as luxury homes, first-time homebuyers or properties in a specific part of town.
Before you contact anyone, check to be sure they have the appropriate credentials from
Dubai’s Real Estate Regulatory Agency (RERA). RERA is the agency within Dubai Land Department that approves licences for real estate agents, brokers and developers.
The RERA website offers several lists of licensed real estate brokers, licensed real estate brokerage offices and approved real estate developers. Be sure to search the appropriate list to determine whether the agent, broker or developer has been sanctioned to sell homes in Dubai.
Be wary, ask for referrals and testimonials
Legitimate estate agents and brokers will have a physical address that you can visit and a working office phone number.
Ask friends or associates for referrals, if possible, since an estate agent’s word-of-mouth reputation is important.
Agents and brokers often solicit testimonials from previous clients, and a trustworthy agent will take pride in showing you their positive reviews.
5. Place an offer on a resale property
You’ve selected a resale property and you’re ready to buy it. Here are the steps you’ll take from placing an offer to completing the transaction.
Placing an offer on a resale property
If you are interested in resale property, your estate agent will place an offer on your behalf and manage any negotiations. Your agent will then work with the seller's agent to create a Memorandum of Understanding or MOU. The MOU is a non-legally binding agreement that specifies the terms of the deal.
Draft the MOU
The boilerplate MOU form is available for download on the Dubai Land Department’s website. The MOU can be amended with additional considerations if they are needed, for instance, if any furnishings are included in the sale or how the money will be transferred.
It is strongly advisable to employ a lawyer to check over the MOU before registering it.
Register the MOU
The MOU is now ready to be registered with the Dubai Land Department, along with a deposit of 10% of the purchase value of the property to be held in escrow until the sale is completed. This will be returned to you unless the terms of the registered MOU are broken.
Besides the escrow deposit, the buyer is also responsible for paying the real estate agent’s fee at this time. The fee ranges from 2% and 5% of your property’s price.
The buyer, seller, and their respective agents must be present for the registration.
Finalise the mortgage and acquire a no-objection certificate
Mortgage agreements should be finalised with the lender after the MOU is registered.
Resale properties in Dubai also require a No-Objection Certificate (NOC) from the original developer that confirms their consent to the sale. The developer will charge a fee for issuing the NOC that varies between AED 500 and AED 5,000 depending on the property.
Complete the sales and purchase agreement
The Sales and Purchase Agreement is a legally binding contract that outlines all the specifics of a property sale, including the dates of transfer and any penalties that you will incur if the transaction is not completed.
It is essential to have your lawyer check through the Sales and Purchase Agreement.
Transfer the deeds and pay for the property
All financing should be complete by the time of the deed transfer and purchase transaction.
The sale becomes final when the deeds have been transferred and the buyer has paid the entirety of the purchase price (with either a home loan or cash).
For resale properties, the deeds are transferred at the Dubai Land Department office. The buyer will usually be offered a final inspection of the property as well.
6. Submitting your reservation for an off-plan property
Alternatively, if you’re buying an off-plan property from a developer, here are the steps you’ll take from submitting a reservation to completing the purchase.
Submitting a reservation form for an off-plan property
Developers in Dubai handle all sales for off-plan properties, so you’ll fill out and submit a reservation form directly to them.
The reservation form should include all of the details and terms of the sales agreement. It’s extremely important to have the reservation form checked by a lawyer.
Pay the reservation deposit
After both sides agree to the terms of the property reservation, it’s time to pay the down payment.
The down payment can range from 5% to 15% but may rise to 20% in some instances. This money should always be held in a securities account approved by the RERA.
The developer drafts the official Sales and Purchase agreement once the reservation deposit is paid. Be aware that buyers will need to submit further payments to the developer throughout the construction process, too.
Register the sale with Oqood
After the down payment, you’ll need to acquire an Oqood certificate from RERA to ensure that the off-plan property is registered in your name. There is a fee of 4% of the property's price associated with this required step.
Deed transfer and final payment for off-plan properties
The deed transfer is the last part of the transaction. You’ll need to pay any remainder of the price at this time, so all financing should be secured in advance.
If the property is not ready for move-in, this process takes place at the developer’s office.
Key facts for prospective investors
Purchasing property in Dubai can also be a smart wealth-building strategy.
Dubai investment real estate offers rental yields between 5% to 9% on average. That rate of return on investment (ROI) combined with per-square-foot prices that are significantly lower than other international hubs make Dubai a continual draw for property investors.
While apartments offer the best ROI for investors, villas and townhouses have gained popularity during the pandemic, according to The National newspaper. The villa and townhouse rental market has benefited from renters’ desire for more space and seclusion.
Additionally, developers’ financing incentives for off-plan villas and townhouses, such as 50% down payment and 50% completion payment, make them appealing for prospective investors. These properties usually appreciate in capital over time as the off-plan community strengthens its infrastructure and secures a foothold in Dubai.
While it's no secret that the Dubai real estate market has weathered a series of downturns due to oversupply, there is a "massive opportunity for savvy investors,” according to a recent article in Forbes.com.
Dubai welcomes expat buyers
Foreign nationals have been allowed to buy property in Dubai without any special permissions or additional regulations since 2002. Today, it’s easier than ever for expats to purchase their dream home here.
Currently, the government does not require buyers to hold a residential visa to purchase property in Dubai. Overseas and GCC-based expats can work directly with a RERA-licensed real estate agent or with a RERA-approved developer to buy property.
For foreigners living overseas who wish to become expats in Dubai, there is also the option of buying completed (not off-plan) freehold property to establish residency.
The government of Dubai offers renewable 3-year to 5-year residential visas to foreign investors who purchase the title deed to a completed freehold property valued at AED 1 million and above.
Dubai also recently launched a 5-year retirement visa for applicants who meet the criteria and there is no age limit on property ownership for expats.
FIRST-TIME HOMEBUYERS FAQS:
Where should I begin?
Start by deciding on a budget and what type of property you’re looking for. Then check which areas have listings in your price range.
How do I find a real estate agent?
Look for estate agents who are registered with RERA, have a physical address and office phone number, and specialise in the type of listings you're interested in.
Should I buy off-plan or resale?
Both off-plan and resale properties have their benefits and drawbacks. Make a list of pros and cons to see which one best suits your needs.
How long does the process take?
On average, it takes about 30 days from the time that you submit an offer until the purchase is complete.
Is buying property in Dubai financially beneficial?
Yes. Whether you’re purchasing property to rent or reside in yourself, buying property in Dubai has more long-term financial advantages than renting it.