Buying property

Ten things first-time buyers need to knowShutterstock

Foreign nationals account for the biggest chunk of property purchases in Dubai. This means that many, if not most, buyers will have to deal with processes and regulations that are unfamiliar to them. Things like the Oqood registration, mandatory fees and even the types of contract to use have to be considered carefully. Here are ten things to remember if you are a firsttime buyer in Dubai.

1. Can foreigners invest anywhere in Dubai?

No. Foreigners or nationals of a country other than the UAE, Bahrain, Kuwait, Oman, Qatar and Saudi Arabia are allowed to acquire freehold interests in areas designated in Dubai for foreign ownership. They cannot acquire ownership rights in real estate outside of such areas. These areas include some of the best-known master developments such as Downtown Dubai, Palm Jumeirah, Dubai Marina, Arabian Ranches, Emirates Living and Business Bay.

2. Choosing a broker.

You should ensure that the real estate agent is registered with the Real Estate Regulatory Agency (Rera) and that the individual broker is also registered with it. This can be done by checking the Rera website. If the agency and broker are not registered, they are not authorised to act as brokers in Dubai and you will have limited recourse to the authorities in the event you have a complaint.

3. Do I need to carry out due diligence?

Purchasers are strongly advised to carry out due diligence, as with any real estate investment anywhere in the world. The principle of buyer beware still applies. However, unlike many other jurisdictions, there is no publicly accessible information relating to real estate ownership in Dubai. The official register of real estate ownership cannot be searched by a prospective purchaser without the approval of the seller, and searches cannot be carried out with public utility companies, etc.

A buyer should request a copy of the seller’s title deed and a power of attorney/no objection certificate allowing the Dubai Land Department (DLD) to confirm  ownership of the property to a prospective purchaser. A valuation will also be carried out by any bank providing mortgage. The government has recently issued laws regulating those qualified to carry out appraisals of real estate, but it is not yet published in the Official Gazette.

4. What type of contract should I use?

A sale and purchase agreement, often referred to as a memorandum of  understanding, is common. Unlike other jurisdictions, in the secondary market these are not generally drafted by a lawyer and are instead provided by the broker. It is important to have this reviewed and negotiated by a lawyer. In case of off-plan property sold directly by a developer, it is not common practice for developers to negotiate their contracts. The DLD has some standard contract forms to be used.

5. Do I need to be present to complete a purchase?

The parties or their authorised representatives must attend in person at the DLD or a registration trustee’s office to complete the transfer. It is the broker who tends to make the necessary arrangements. If you appoint a representative on your behalf, it should be done through a power of attorney that is either notarised in the UAE or validly executed overseas and notarised and authenticated for use in the UAE. In the case of the latter please note this could take a few weeks.

If the seller or buyer is a company and not an individual, there are further documents required by the DLD. The broker can advise you on this or you can obtain these documents from the website.

6. Howcan I pay?

Payment is usually made by way of manager’s cheques (bank draft) provided on the completion date to the seller at the DLD. Only citizens and residents of the UAE can open bank accounts in Dubai, so a non-resident needs to agree a method of payment early in the negotiations with the seller.

7. Is finance available?

There are mortgages for foreigners through UAE banks, although local banks mainly cater to UAE nationals and residents. There are restrictions on maximum lending to foreigners: up to 75 per cent of a property’s value where the value is Dh5 million or  ess, and up to 65 per cent where the value is more than Dh5 million.

8. What are the fees when investing in real estate in Dubai?

In addition to the fees due to the broker, the DLD charges 4 per cent of a property’s value for registration of property transfer. This is paid by the purchaser, but could be shared with the seller. Registration of a mortgage attracts a fee of 0.25 per cent of  he amount borrowed plus a minimal knowledge fee.

9. Will I receive a title deed?

Yes. Following the transfer of the property, the purchaser will receive a new title deed. If the property is mortgaged, the original title deed will be issued to the bank with a copy being provided to the purchaser.

10. Are there protections when buying off-plan?

Contracts for property bought off-plan must be registered with the interim real estate register or Oqood once both parties enter into a sale and purchase agreement to protect the purchaser from fraud, such as the unit being resold. Registration costs 4 per cent of the purchase  rice. Upon completion of the unit, the buyer no longer has to pay for property  ownership registration at the DLD.

All instalments received by a developer must be based on agreed construction milestones. Instalments and any bank finance raised by the developer are paid into an escrow account with a trustee bank. The developer can only withdraw funds if the relevant construction milestone has been met, with approval from Rera.

And remember, while Dubai’s property market is well regulated, the regulations and processes themselves can be quite different from the laws and procedures that apply in your home country. As with any important investment, be sure to seek advice from professionals to protect your interests, just as you would anywhere else.

Source: Jessica Lambert and Helen Hangari, Special to PW


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