Your legal guide to buying real estate in Dubai
Based on the latest report from the Dubai Land Department (DLD), real estate transactions generated a staggering AED 12 billion in the first 15 days of 2017. These early figures continue to demonstrate the growth and increasing activity of the emirate’s property market; with more and more investors and expats buying property to enjoy the long-term benefits. Last year saw a total of 55,928 investors – comprising UAE and GCC nationals, Egyptians, Indians and Pakistanis, and from as far afield as China, Canada and France.
So, if you want to get on the property investment band wagon, the time is right! But before you do, you need to understand the purchasing process. To help you get started, here’s a guide to the legalities involved:
Step 1: Understand the legal procedures
As well as UAE and GCC nationals, foreign nationals can own property in Dubai. However, only certain areas of Dubai are designated by UAE law for foreign ownership; and buyers aren’t required to be UAE residents in order to invest.
The process is fairly straightforward, with the buyer and seller agreeing to terms with or without the help of a real estate broker. Followed by this, a Memorandum of Understanding (MOU) is signed and a certain amount is paid as a deposit, usually 10% of the total amount. All parties then proceed to the developer’s office to apply for a No-Objection Certificate (NOC); which is issued against the payment of a fee. Once the NOC is issued, the parties meet at the Dubai Land Department (DLD) office to pay off all other duties, such as the registration fee and to transfer ownership and issue the new title deed.
If you’re purchasing with the aid of a mortgage, the bank’s involvement will also be required.
Step 2: Know the legal documents required
You must also know the list of documents that are required to complete a deal. This varies depending upon if you’re an individual buyer or a corporate entity. As a buyer, it’s advised that you approach the Dubai Land Department prior to the completion date to have the documents pre-approved. You should also ensure you have prepared copies of all the documents; plus each one must be translated into Arabic by a certified legal translator before presenting to the Dubai Land Department.
Step 3: Standard costs to pay
There are certain costs to be incurred when buying property in the UAE:
- NOC fee: between AED 500 and AED 5,000 payable to the developer
- Registration fee: 4% of the purchase price payable to the DLD
- Real estate agent’s commission: usually 2% of the purchase price
Besides these costs, there might be additional charges applicable at the developer’s offices and the Dubai Land Department. Later, there are likely to be building / community service fees that need to be paid to the developer. Essentially, it’s advised that you know about all these costs well in advance and set your budget accordingly.
If you’re thinking about taking out a mortgage, keep in mind that mortgages are generally only available to expats who are Dubai residents. Other Central Bank guidelines to consider when taking out a mortgage include:
- First time expat buyers investing in a property valued up to AED 5 million can borrow up to 75% of the property value (UAE nationals can borrow up to 80%)
- For properties valued more than AED 5 million, first time buyers can borrow up to 65% of the property value (UAE nationals can borrow up to 70%)
- Expats investing in their second property can borrow up to 60% of property value
- When buying off-plan properties, a 50% deposit is required from UAE nationals and expats alike
- A buyer’s debt-to-income ratio should not exceed 50%
- The mortgage period should not exceed 25 years and there’s an age limit (between 60 to 75 years)
- Foreign nationals can only apply for a home loan amount that doesn’t exceed their annual income multiplied by seven
Step 4: Know about the time frame
An average property purchase in Dubai takes approximately a month to complete from the date on which the agreement for sale is signed. However, in some cases, it may take longer if there is a mortgage involved, predominantly from the seller’s side. So as a buyer, you’ll need to discuss the time frame of the purchasing process with your agent to avoid any delays later.