Buying property might be a tough yet rewarding decision, taking into account the specific opportunities for lifestyle in the United Arab Emirates (UAE).
A local person or an expatriate planning to buy property in the UAE does have its own rules, incentives, and risks. We summarized the key factors you might want to consider before making this decision.
Underline the legal framework
Ownership of foreign properties in the United Arab Emirates has been transformed through the last two decades. Following the introduction of freehold properties, non-UAE nationals can now own their own properties in specific places all over the country. Knowing the legal framework and understanding which types of property ownership exist is very important; for example:
a) Freehold ownership: This gives the buyer full ownership rights of the property and the land it stands on without any time-bound restrictions.
b) Leasehold ownership: This gives the buyer the right to utilize the property for a fixed number of years, usually in the range of 30 to 99 years.
Determine your budget and financing options
The very first step would be to figure out your budget and source of financing. The banks and financial institutions of UAE offer a variety of mortgage plans for different needs. There are the following factors, amongst others:
a) Down payment: Generally, a minimum down payment of 25% of the property’s value is expected from expatriates while the UAE nationals need 20% down payment.
b) Mortgage protection insurance: This is a policy that provides security for mortgage repayments against untoward events, like unemployment, disability, or even death. Mortgage protection insurance gives peace of mind as well as financial protection both to the borrower and the family.
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Location and property type
The United Arab Emirates offers a wide range of locations and types of properties, from luxurious villas to modern apartments. The following should be taken into consideration when choosing the location:
a) Accessibility to amenities: The property should be close to essential amenities such as schools, hospitals, shopping centers, and public transportation.
b) Future development plans: Keep an eye on upcoming projects and infrastructure developments in the area, as they can impact property values and rental yields.
c) Property type: Weigh the pros and cons of apartments, villas, and townhouses based on your lifestyle, preferences, and investment goals.
Engage a well-known property agent
A professional real estate agent can lead you through the UAE property market by guiding you and providing you with valuable insights. An ideal agent must have the following qualities:
a) Familiarity with the local market: This means they will be knowledgeable about market trends and direct you to the right opportunities and locations.
b) Client references: Positive client reviews and testimonials can demonstrate the credibility and professionalism of the agent.
Be aware of extra costs
When buying a property, you will need to add the following extra costs on top of the price tag:
a) Transfer fees: Transfer fees are usually between 1% to 4% of the property’s value, payable to the Dubai Land Department or the respective land department in other emirates.
b) Agency fees: Most real estate agents charge between 2% and 5% of the property value as a fee for their services.
c) Mortgage registration fees: When acquiring a mortgage, you are liable to pay mortgage registration fees usually at 0.25% of the loan amount.
d) Maintenance fees: The apartment and townhouse owners often have to pay annual maintenance fees for the communal services like security, gardening, and building maintenance.
Inspect the property and review the contract
Before finalizing your property purchase, you should:
a) Conduct a thorough inspection: This will help you to detect any defects or maintenance issues that may need attention or negotiation.
b) Scrutinize the contract: Engage an attorney to analyze the sale and purchase agreement for all the clauses and protect your rights.
Potential rental income
If you intend to rent out your property, you can look at the rental market for that area. This helps in understanding potential rental yields as well as vacancy rates. The factors that may affect your rental income include:
a) Location of the property
b) Size and type of property
c) Accessibility to amenities and transport connections
d) General state of the property and its upkeep
Real estate investors find it smart to invest in properties in the UAE. However, this calls for profound research and planning since one has to consider the legal framework, the budget they have, their preferred location and type of property, a reputable real estate agent, more costs incurred besides the purchase price, an inspection of the property, and potential income from renting it out.
You should note that purchasing a mortgage protection plan is required when seeking a mortgage in the UAE. The Central Bank of UAE does not oblige you to take this from your lender; however, you can buy the mortgage cover from your preferred insurer. For example, consider HAYAH’s Loan Protect policy, which comes with the following features:
1. Providing cover either for you or your beneficiaries during loss of life, terminal sickness, or disability for term lengths that range between 1 year and 35 years.
2. Offer to pay either in AED or USD – either month, yearly, or as one premium.
3. Cover can go up to AED 50,000,000
4. Constant premiums by the duration of the policy.
5. Free temporary life cover from the date when you fill in the form to the date when you receive the policy.
6. Other benefits like Priority Screening through HAYAH.
Through getting hold of a full mortgage protection cover such as HAYAH’s Loan Protect, you will have an insurance covering mortgage repayments should some sort of event prevent you from settling your mortgage repayments. By following the above advice, you are assured that you will achieve the ideal property investment in the UAE while at the same time ensuring financial security for both you and your loved ones.