The Property Buying Process

Many of our visitors are familiar with purchasing property in their own home market however, the process of finding and securing a property in Dubai or any of the other Emirate states can be quite different. The following paragraphs will give you an insight into the local market.

Finding a Suitable Property

With so many developments available on the market the biggest challenge to face most of our visitors is finding the most suitable property to their needs. Some visitors are looking for a property to live in and others for an investment one that will provide either a good rental or resale in the future.

To help achieve the Sandcastles.ae website lists available property from all over Dubai and other Emirate states, we ensure our listings are updated weekly so you can see the current market. Property deals tend to get closed quite quickly, with this in mind it is highly advisable to arrange your finances prior to commencing your search, this often helps to avoid disappointment.

Construction Period and Developers

Most developments are due for completion at least 24 months after launch. It should be noted that the system of Escrow accounts in Dubai is now fully in effect and all developers should be offering this as standard, In the past the majority of developers used investor's installment payments to fund the construction of their specific buildings. There is obviously little risk with the Government backed developers, but it is important to use reliable private developers. To ensure investor protection, the Dubai Government now require that developers lodge a bond for 50% of the sale price of the building before units can be marketed for sale.

Payment Schedules

Units are paid for by a series of payments spread over the construction period. Previously payment schedules tended to be quite evenly spread requiring the majority of the purchase price to be paid before completion. All developments vary but typically the purchaser would be required to put down 10-15% booking deposit followed by 10/ 15% every 3 months or even up to 20% installments in some cases.

Under the new Escrow laws the payments are linked to the construction so as the building is being built the developer will be asking you to make your next payment.

Escrow law does not apply to government owned developers such as Emaar, Nahkeel, Dubai Properties and a few others. Also the Escrow law is only active in Dubai not in any other Emirate states. With these none Escrow developers they offer a payment plan which you must follow or risk incurring late payment fees that vary from developer to developer.

Whether you buy from a private developer or a Government owned ensure you have the payments ready and request statements from your developer on when the next payment is due to avoid paying these penalties.

Also in the rare cases where a number of payments have not been made the developers both private and Government can cancel the agreement and return all the money paid back to you. They will then re-market your property at the current market price.

Premium

A property is sold by the developer at the 'Original Price' to the purchaser. The capital appreciation on the property is referred to as the 'Premium.' When a purchaser buys from another individual it is referred to as a 'Secondary Sale.'

Buying property of the secondary market is still very profitable as the current market trend is that property prices are increasing.

When buying of the secondary market you will need to pay the current owner the money they have paid to the developer and their ‘Premium’ this results in a bigger cash outlay than buying at the developer's original price. The advantage you have is that the property will be ready sooner and you can resell it once the property is fully developed usually at a much higher price.

Valuations

If you are raising finances for your Dubai property from one of the locally based Banks you will often be required to obtain a valuation if you are buying a 'secondary sale. This is normally quite a straightforward homebuyers valuation and is aimed at confirming the market price and any premium on the property.

Valuation fees are non-refundable and non transferable, Valuations are performed in advance of any personal financial checks, so if you apply for a mortgage with HSBC bank and they decline your application, the next bank will conduct a new valuation. Valuation fees vary from bank to bank.

Re-Sale Terms

The terms and conditions applied for re-sale differ from developer to developer but it is worth noting them for the 2 largest developers:

Emaar - any Emaar property can only be re-sold once during the construction period, i.e. Purchaser 1 buys off-plan from Emaar but decides to sell before completion. Purchaser 2 can only re-sell that property after it is complete which means settling the balance outstanding to the developer on the due date. Once the property is complete it can be sold on again at any time. Emaar charges a Transfer Fee of 1.5% for a property that is yet to be completed and registered with the Land Department. In the case of a registered property, sellers will require a No Objection Certificate from Emaar, currently costing AED 5,000. The land department will charge 0.5% to the seller and 1.5% to the buyer.

Nakheel - any Nakheel property can be re-sold at any time. At whatever stage the payment plan is at, a 10% accelerated installment is applied, i.e. if Purchaser 1 has paid 30% so far to Nakheel then Purchaser 2 has to pay 10% or the next payment due on transfer. Nakheel charges a Transfer Fee of 2% (of Original Price). Land Department fees are as above for completed and registered properties.

These terms are subject to change.

Most private developers allow re-sale to take place at any point during construction and typically charge a 2% (of Original Price) Transfer Fee.

When buying on the secondary market the Estate Agent will take a deposit payment form you and will be asked to enter into an MoU (Memorandum of Understanding) which is signed by all parties. In this MoU you will be made clear of your obligations and a transfer date is set usually four week from the date on the MoU.

Ensure you have the funds in place as you could risk loosing this deposit if the transfer does not happen by the agreed date.

Mortgages and getting Finance

Overseas banks are now offering finance packages to UAE property, keen to cash in on the property boom. Check with your local bank to see if they offer this service.

UAE banks are getting better at the lending process to get a mortgage from a UAE bank you must prove your income for at least six months if you are new into the UAE then the statements from your home country can be used, a salary certificate from you employer showing your paid salary each month this is require as there are no income taxes in the UAE so Pay slips may not given to the employees and a Residency Visa again this is given to you by your employer at the time of employment. Employees are also referred to as ‘Salaried Individuals’ on the application forms.

You will need to open a bank account allowing you to write cheques for payments and any deposits.

Transfer

This refers to the actual day when you take ownership of the property weather it be off plan or ready, only applies to the secondary market on this day the Seller will expect to be paid his money and the developers their transfer fees if the property is complete then there are additional fees to be paid to the Land Department.

Land Department

The Land Department charge fees for each completed property transfer 0.5% to the seller and 1.5% to the buyer of the original price. These fees are payable on the day of transfer.

Payments

When buying of plan payments can be made in any way cheque, Bank transfer or Cash as long as it clears by the payment due date.

When buying on the secondary market these payments are made buy using a ‘Managers Cheque’. A Managers Cheque is a cheque issued by your bank and has the payees name printed on the cheque and is signed by the bank manager this proves to the seller that the funds are in place to perform the transaction. This Managers cheque is like paying in cash.

UAE Law states that if a cheque bounces it is considered a criminal act. You can be charged and taken to prison. Even if they have a sound reason for canceling the cheque you are charged first and questioned later. You will be asked to state your reasons for canceling the cheque in court.