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With increasing rents in Dubai burning a hole in the monthly expenses, there are many who are tempted to buy a property. Experts point out that the current market conditions are favorable for buying property in Dubai with most indicators pointing to the prices poised for appreciation.
But effective financial planning and carrying out a thorough legal scrutiny of the purchase agreement are key to ensure a smooth transition from being a tenant to being a homeowner.
Financial planners advise no more than 40% of one’s net income should go towards housing to avoid going for a property beyond their means.
For property buyers who have taken loans from banks, six months of mortgage should also be used as cash reserve. This is to ensure that you do not end up paying penalties for default due to personal financial crisis. The homeowners should also take into account other expenses such as the title deed registration charges and fees charged by real estate agencies. Homeowners should be prepared for changes in the mortgage rates which are spread over many years. Even if there are slight changes in the rates, it will have a big impact on your monthly payments to the bank. If the current interest rate is 5% and if it is hiked by a mere 1%, there will be around 20% jump in your total repayment amount.
Buying a house in the UAE makes sense for expatriates who are assured of employment in the country for a considerable period of time. If your job does not guarantee a permanent placement in the UAE, it is not feasible to invest in a property in a foreign country; renting a property is a better option.
Before taking the big leap, it is also important to study the credentials of the builders. Both the builders and the project need to be registered with the Real Estate Regulatory Agency (RERA). Before signing the sale and purchase agreement of an off-plan project, the buyer should also check if the developer has an escrow account where the payments made by him will be credited.
Handy Hints in Buying Property in Dubai
• Not more than 40% of monthly income should be spent on paying loans
• While planning for finances, also take into account rise in mortgage rates
• Make sure that the property builder and project are registered with RERA
Source: S. Dhar, Special to Properties
The writer is a freelancer