Roadmap for buying and financing property

A long-term view will help minimise uncertainty in a home purchasePawan Dhawan, Head of Home Finance at Noor Bank

Buying a home is a complex, multi-dimensional process that requires us to simultaneously make emotional choices as well as hardheaded financial decisions. Add to it the fluctuations of the property market, change in government regulations and bank financing requirements and, what should have been a satisfying life project, can become a stressful one.

The only way to minimise uncertainty—is to take a long-term view, remain informed at every step and have a clear roadmap of what to expect and execute when buying a home.

1. Property selection: Time, space and process

Before you start scouting the advertisements, discuss with your family and friends if buying property is the right decision at this juncture. After all, it’s a choice that will take up considerable time and entail strong financial commitment on your part.

Market timing: Always take stock of the current market situation and whether you can get on to the winning side of the bargain. Home-price growth in Dubai is slowing down, with a bottoming out of the market likely to happen at the tail end of 2016, according to real estate consultancy possibly, there will be a three to five per cent dip in housing prices over the next 12 months, fuelled by faltering global growth and supply levels moving up.

This, however, is no reason to back out from a buy. A long-term view is essential while taking your decision. Infrastructure investments planned around the World Expo 2020 will boost the rate of job creation and formation of new households. Also, a vast majority of residential submarkets have seen little to no change in values this year as the appeal of buy-tolet apartments holds steady. Data shows that total number of apartment transactions in the first nine months of 2015 was 6.6 per cent higher than in the same period in 2014.

Purpose of space: Once you are convinced about the macro-timing, it is necessary to pinpoint the exact reason for purchasing property — either for investment or for end-use. If you are buying the property for immediate use, then your house-hunting must take into account community spaces like parks and swimming pools. Distance to good hospitals, schools and access to convenience stores are important considerations. Make an assessment of whether the area has good linkages to public transportation and does not fall in the cusp of traffic jams.

Selection of property

Whether buying off plan or ready, it’s important to research previous track record of the developer and real estate agency (if any) through the Real Estate Regulatory Agency (Rera). Factors which are critical in accessing the developer include key indicators such as quality, on time delivery and previous projects undertaken. In case of off plan, viewing the show apartment/villa as well as the location should
be considered.

Purchase process: Once you have zeroed in on a particular property, your journey will depend on whether the purchase is being made from a developer, an ‘offplan’ purchase, or from a private seller, which is termed a ‘resale’. When buying directly from a developer, local and expatriate customers have to follow a set of procedures.

At this stage, familiarise yourself with reservation deposit amounts and drafting of formal sales and purchase agreements. While transacting off-plan property, be sure the purchase agreement includes completion dates with payment plan linked to milestones and compensation clauses if the property is not completed on time.

If purchasing from a private seller, both parties will need to agree on a Memorandum of Understanding, a document that outlines the terms and conditions of the agreement. However, whether you are buying in the primary market from a developer, or secondary market from a private owner, take help of experts such as Rera approved real estate agency or registered conveyancing company who have consultants to deal with the nitty-gritty of paperwork, inspection of property and financial requirements like down-payments, bank  financing and transfer fees.

2. Financing: Analyse the choices

Even as you come to a decision to purchase a particular property, perhaps with the help of an agent, it is time to simultaneously work out the finances. In case you are not paying cash and need bank financing, you should get a pre-approval from the bank. For a nominal fee the bank underwrites your application, stating your capacity for accessing finance. The pre-approval gives you to negotiate better in the property market. With around 46 odd banks in the UAE combining over a significant number of financing product combinations, home investors may feel overwhelmed. A comparison website will give an idea of what different banks are offering, or you may ask your bank for the services of an expert, and a full fact sheet and consider the fees for the entire tenure of the finance.

Compare profit rates, fees and features: Once you have a short list of all financing plans, draw up a table to compare the profit rates, fees and payment amounts. Understand the regulatory norms for financing as it could affect your very lifestyle, once you go in for it. Try to go with a bank whose transactions are reputed to be transparent and customer-friendly.

3. Charges, paperwork

At every stage, buyers need to be vigilant about the kind of charges and paperwork they will run up. All those opting for home financing will have to take extra care to handle two ends — property transaction and bank financing requirements.

Buyers will also need to be cognisant of other charges applicable in registering their property with the government, such as the current 4 per cent registration charges on the price of the property and agent’s fees, which are normally 2 per cent of the purchase price. Additionally, developer fees and maintenance fees may also apply which are usually fixed yearly and approved by Rera.

In Dubai, there is a  standardised purchase agreement contract or MOU form for property purchases. When buying property in the resale or secondary market, the seller and buyer sign this purchase contract provided by the real estate authority and is available on Rera’s website which is drawn up by your agent if you are buying a resale property. Do not sign the contract until all agreements and terms have been agreed upon. Although the Dubai market is quite regulated now, always exercise caution.

If you are buying off-plan, direct from the developer the deposit and payments are made to the developer bias the sales and purchase agreement which is milestone driven. In case of ‘resale’, always ensure that the seller actually owns the property in question.

Source: Property Weekly


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