Financial flexibility key to purchasing a home

Financial flexibility key to purchasing a homeImage Credit: Supplied

As property prices in Dubai witness a cool down, many buyers are tempted to make the most of the opportunity. Though new regulations in the real estate sector offer a number of safeguards to homeowners, they should also plan their finances efficiently. Raj Sahani, chairman at RSG International, gives an overview of the property market and explains how to make the right choice when buying a home.

Tips on buying

A buyer's mantra should be to get a home that is financially comfortable. While there is a two-fold of buyers, the investors and the end-users, investors should look for developers who offer financial flexibility to make use of their cash wisely. End-users should have enough cash reserve to make a down payment.

Also, not more than 40 per cent of one's net income should go towards property payment. For buyers who get loans from banks, six months' worth of mortgage should be used as cash reserve. This ensures that the buyer does not end up paying penalties for default due to personal financial crisis.

Buying a home is not just a matter of replacing a rental payment with a mortgage payment. There are maintenance costs, utilities and other costs to consider before taking the big leap.

One should also look for established and reliable developers. There are plenty of developers in the market who offer attractive schemes and incentives, but some never complete their projects. Everything agreed upon at the time of contract signing should be documented to avoid discrepancies in the future.

Recent trends

The real estate market in Dubai has matured, leading to much-needed stability. Improved regulations and mortgage cap have been the major influencers in streamlining the sector.

With Dubai witnessing a population growth as many citizens look forward to settling here ahead of the Expo 2020, it definitely remains a great choice to buy a property. In addition, it is a safe haven that provides protection and security for its residents.

However, it is important for investors to select a property built by the right developer in the right area and with the right layout. People should only invest in projects that thoroughly meet the rules and regulations of the Dubai government to avoid future distress.

Alternative communities, just 15 minutes away from Shaikh Zayed Road, are great areas to invest in. Given the location of all major infrastructures like the Al Maktoum International Airport, Dubai International Airport, and the new logistics hub Dubai South (earlier known as Dubai World Central), the site of the Expo, we can expect clusters of alternative communities witnessing an upward movement. Amenities in these areas have been upgraded, with the addition of new shopping facilities.

The International Media Production Zone (IMPZ) saw the opening of a new shopping centre. The mall will serve communities such as Victory Heights, Jumeirah Golf Estates, Jumeirah Village Circle and Triangle, MotorCity, Dubai Sports City, Barsha South, Dubai Investments Park and Arabian Ranches, representing approximately 105,000 residents.

While the rates would vary from one developer to another, the properties in Jumeirah Village and IMPZ are certainly cost-effective as compared to the properties in the heart of Dubai.

From a builder's perspective, there has been no major change in the price of raw materials. While cement prices have remained stable, steel has seen a little fluctuation once in a while. Compared to the global market, the prices of raw materials in the UAE have remained consistent.

Protecting buyers

Stringent by-laws and the promotion of best practices will ensure the developers deliver quality properties on time. Regulations ensuring property developers register their developments and complete them on time will definitely aid those buying off-plan properties. The escrow law has been able to regulate the construction and selling of properties, thereby safeguarding the rights of buyers.

Similarly, homeowners should see to it that their units are registered at the Dubai Land Department under their name to avoid discrepancies in the future.

The financial side of buying property

• Look for real estate developers who offer financial flexibility in terms of attractive payment schemes and incentives

• Buyers should have enough cash reserve to make a down payment and not more than 40 per cent of their net income should go towards property payment

• Those who avail themselves of bank loans should set aside six months' worth of mortgage as cash reserve

• Factor into the decision maintenance and utility costs, and other charges

Here are the calculations you need to make before buying

Source: S. Dhar, Special to Freehold


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