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I bought an off-plan unit in Dubai and paid 20 per cent down payment. Since I am a non-UAE resident, can I qualify for a mortgage? What is the process?
As a non-UAE resident, you can apply for a home loan to support your purchase. However, there are certain benchmarks set by the UAE Central Bank. For off-plan purchases, banks only provide 50 per cent funding of the agreed sale amount irrespective of value, category of purchaser or purpose. Therefore, you should initially deposit 50 per cent of the property value and the balance will be paid by the bank to the developer’s escrow account. Every bank has a list of approved developers; thus, if the project is listed with the bank, it will be financed; if not, you might have a tough time. Not all banks finance off-plan construction so you need to speak to a few banks to identify the lender or appoint an independent mortgage expert who can do all the legwork to make your job easier.
I have a property in Dubai and I am looking to release equity against that property. Please advise.
There are points to be considered to determine if you qualify for equity release or not. Is the property bought in cash or mortgaged? If mortgaged, what is its outstanding value? Is it vacant or rented? If rented, what is its rental value? If the property is mortgaged, the outstanding loan amount needs to be checked. The equity release amount can be determined in accordance with the current lending parameters and market value. To obtain equity release, the bank will conduct due diligence and get the property evaluated first. They will need the property documents, your income details and bank statements. There are two options to pull equity: based on pure rental value if it is rented or based on your monthly income. The bank will also try to identify other income sources to give a strong base to the case. The duration of the loan is set depending on the borrower’s age. Accordingly, the process will be completed.
I am planning my first investment in Dubai. Should I buy office space for higher investment yield?
Since it’s your first investment, start with a residential unit to make yourself comfortable with the market. If you plan to expand your portfolio, investing in office space offers great capital appreciation. The Dubai commercial market has shown optimistic trends in the past few years; it is anticipated to continue to show growth in the near future, especially due to the Expo 2020. The main benefit of investing in commercial real estate is its earning potential. Offices, warehouses and showrooms usually have a yearly return of around 7 to 9 percent depending on the location and type. Due to long-term tenancy commitment, the property will have remarkable yields and monthly cash flow stability. To make an exceptional investment decision, appoint a real estate broker who can guide you and ensure you get more out of your investment.
Does the current market advice about buying a property? Is it still true that we can cut housing costs by buying a property instead of renting?
Dubai is still a buyer’s market and considered to be a safe haven for investing in properties. Since the property sales prices remain steady in most residential areas, it will surely be a realistic judgment call to buy a property now. And if the buyer can afford a 25 per cent down payment, with a mortgage, the housing cost can be put down through owning a property instead of renting. With the softening of property prices, if one considers buying a property here for long-term investment, it will leverage capital appreciation. Considering the current mortgage rate of 2.99 per cent fixed for the first year, the monthly instalment for Dh1 million works out to Dh4,737 for the loan term of 25 years, i.e. approximately Dh57,000 annual cash outflow. Consequently, if you pay an annual rent in the equivalent amount, you have the assurance of paying a mortgage instead of rent.
Question of the Week
I bought an off-plan property on a payment structure. I already paid 50 per cent and plan to take a mortgage to pay the rest of the amount, but banks are asking me about the Oqood paper. What is it?
Oqood is a necessary registration process for off-plan freehold properties in Dubai. It aims to centralise all off-plan property transactions between property developers and buyers. It helps maintain a trusted regulatory environment for the Dubai real estate industry. It benefits both developers and buyers by upholding complete transparency in off-plan registration, processing and transaction.
The Oqood certificate is basically a contract in Arabic and English issued by the Dubai Land Department (DLD) against an off-plan purchase. It is a proof that you own the property.
In the case of developers defaulting or withdrawing, the owner can file a complaint at the DLD with the Oqood certificate as evidence.
Regarding Oqood registration, check with the developer. You might need to pay a fee, which should be 4 per cent of the property price.
With regard to mortgage finance for off-plan construction, banks will surely need the Oqood certificate, along with other documents, to verify your purchase. Accordingly, they will be funding the particular project.
Send in your property issue-related questions to be answered by industry experts, mentioning ‘Ask the Agent’ in the subject line, to: firstname.lastname@example.org
Source: Dhiren Gupta, Special to Freehold
Managing Director, 4C Mortgage Consultancy