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Question of the Week
What are the steps in buying property in Dubai?
There are a series of checks and requirements to be completed to ensure an issue-free transaction. The first step is to consult a financial advisor who can help you determine what you can afford. You should then obtain a pre-approved mortgage if required.
Then you select a registered broker or agent, who can add value by allowing you to make the best decision.
Searching for the property of your dreams can be a frustrating and time-consuming experience. While you can delegate this to your appointed property broker, I recommend you conduct your own search as well. It will assist you in gaining an appreciation of what is available for your budget.
Once you have a property that is of interest to you, your broker must complete the necessary background checks to ensure there are no impediments to a sale.
If all is in order, you proceed to make an offer. If your offer has been accepted, you need to sign an MOU which details the terms and responsibilities of both parties. You then provide a 10% deposit.
If you have applied for a mortgage, your bank will be informed of your intentions and carry out a property valuation. When the bank gives the go-ahead, the seller applies for an NOC from the developer.
An appointment is then made with the DLD to complete the transfer. The seller, buyer, respective agents and bank representatives attend to formalize the transfer. When all documents and transactions have been completed, you will receive the title deed.
Why should I use a broker instead of directly approaching the end-users or developers?
A broker or property consultant can help you determine what you are really seeking or require. Once your requirements are determined, he can help set your expectations with regard to availability and affordability. Setting a realistic budget based on disposable income, lifestyle expectations and willingness to take on debt is an important part of the process as is explaining how you can get the most for your budget. Any good property consultant will have extensive market intelligence on asset type availability, configuration, developer or contractor reputation, price, finance availability, etc. There is also the process of negotiation and finalizing a purchase. You will pay a consultant to add value by finding the property you require, saving you money, minimizing your risk, ensuring you are legally compliant and providing you with peace of mind.
Should I assign a finance advisor when purchasing my first home, or should I do that myself?
I always recommend that clients consult with a financial advisor prior to purchasing property as this requires careful planning and a clear understanding of what it will entail, the effects it will have on lifestyle, the risks it may pose and the benefits of generating wealth through ownership. Sometimes it is difficult for clients to take an objective and realistic view because of emotions surrounding the purchase. A financial advisor can help you assess all these elements by helping you determine what you actually require, what you can afford, how best to use available finance and current assets, and how owning a home is going to enable you to grow your wealth. The financial advisor will view your property purchase as one part of your overall financial landscape and guide you into committing the right type and amount of resources to acquiring that dream home.
Should I use my cash money to buy property or to seek a finance provider?
If your cash is currently employed in other assets, earning more than the current mortgage rates on offer, I recommend you borrow to finance the purchase of your property as long as you have the option of using your cash to pay down the mortgage once your mortgage interest rates start exceeding the return of your other investments. Property finance has been cheap for some time now but the opportunity to take advantage of today’s low mortgage rates will probably not be around in two or three years. We have been encouraging clients to buy as soon as possible and benefit from lower interest rates. Even where they had not found their perfect home, some of them settled for a less-than-perfect choice and plan to upgrade to their dream abode in the future. With careful planning, they will benefit from low interest rates in the ensuing few years, enabling them to grow their equity more quickly to a point where they can more easily afford their true dream home.
I plan to invest in real estate. Would you recommend investing in villas or apartments?
Villas provide lower rental yields but higher capital appreciation and vice versa for apartments. But the market rarely moves uniformly. There is always a difference in the investment returns to be expected from different asset types, in different areas, at different stages of completion, over different periods of time. In today’s market, I am recommending to my clients to invest in affordable apartments, or construct a portfolio of affordable apartments and villas. Projects such as those located within Dubailand Residence Complex including Queue Point in Liwan, Skycourts, Sarah Ajmal and Windsor Residence are filling the affordable housing void and, if you wish to diversify asset types, I suggest you consider Pacific Village as this project offers high quality, affordable and extremely spacious modern villas and townhouses. All provide affordable solutions with little compromise and have the potential of providing excellent returns.
Other helpful tips: Buying a property - Reduce risks through property inspection
Source: Mohanad Alwadiya, Managing Director, Harbor Real Estate, Special to Freehold