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Real Estate investment satisfies the many concerns of end users, speculators, launderers, hedgers, corporate divestments, investors and private equity funds. The investment stimulus varies, but these concerns revolve around the investment objective and its scope. Real estate investment in Dubai adds relevance to the majority of these players. The real problem is the methodology in seeking the ideal investment, as well as addressing individual limitations.
Dubai's real estate market is complex, yet each product is very specific and relevant to a particular investor profile. A credible property consultant will help a buyer navigate through the complex maze of offerings and find a specific product. Each product, including ready property, off-plan projects, retail investments, plots, buildings and industrial investments such as warehouses and labour camps, is appropriate for a particular type of buyer.
A specific product can also be examined based on community profiling, microeconomic factors supporting the sustainability of the return on investment (ROI) in the community, theme and relevance to the end users.
Furthermore, an investor will also have to:
- Be clear on the purpose of the investment. Is it to own a dream home for personal use, acquire property as a hedge against rising tenancy costs or own an asset or a second home to keep a sustainable cash flow. Each of these priorities will help determine what property to look for.
- Choose a consultant who is experienced, credible and authorised by the Real Estate Regulatory Agency. This stage is critical and will define the entire buying experience because at the end of the day, you will be looking at the same property in the market regardless of the agent. Hence, dealing with multiple consultants is not the best approach.
- Arrange the financing to avoid surprises. Cash deals are convenient, while mortgages need more preparation. It's best to deal with a known banker or one that is referred by property consultants for having an easier mortgage process and lower interest rates. Get bank pre-approval as early as possible to know the eligibility criteria and value of mortgage offered, which depends on a client's profile. This will help draw the line for the budget, focus on practical options and streamline the process. Expats buying property for the first time are eligible for 75 per cent of the property's value and 60 per cent for those buying a second property.
- After choosing a property that serves one's requirements, try to ascertain the legal ownership of the property, its title deed and whether it is free from encumbrances or loans. The final step is to get the property evaluated by the bank, which would then determine that amount to be disbursed.
- Once the above measures are completed, the rest of the steps can be hassle free, beginning with the signing of a memorandum of understanding between the parties, stipulating the agreed price and period of transfer. The seller is required to get a no objection certificate from the developer during this period and clear maintenance dues and other outstanding fees, while the buyer completes all bank requirements. Additional costs above the sales price also have to be settled, including the 4 per cent transfer fee to the Dubai Land Department (DLD), 2 per cent commission and minor costs such as title deed fee, etc.
If the property is rented, the buyer is legally entitled to prorated rental returns.
On the other hand, although the core process is similar, buying off-plan or projects still under construction requires a different profiling methodology:
- Determine if the project profile suits one's investment needs. Conduct due diligence on the developer, including its previous projects. Also, the project should satisfy one's investment objectives in terms of the project theme, location, expected ROI, asset appreciation, payment terms and delivery period.
- Buying off-plan is like making a wish — you can't bank on it until it is realised. Hence, choose communities that can offer value addition in the long run. Communities that have multiple macroeconomic factors supporting them are more lucrative, while also sustainable due to the underlying theme supporting them, e.g. Dubai Sports City.
- Ensure the project is registered with the DLD, which adds credibility and ensures that payments are directed to an escrow account.
An informed consultant facilitates the process, with the objective of offering a solution and not just a transaction. The buyer's task, therefore, becomes easier when choosing a reputed, authorised consultant.
Find out how property management adds value to investment
Source: Ahmed Khan, Special to Property Weekly
Ahmed Khan is a property consultant at Elysian Real Estate