In May 2002, His Highness Sheikh Mohammed Bin Rashid Al Maktoum announced that real estate in designated areas of Dubai would be available for ownership by foreigners on a Freehold basis and this was followed by the launch, in the same year, of The Palm Jumeirah. Foreign ownership in these areas was legalized in March 2006. The other Emirates followed suit with Abu Dhabi announcing permission to acquire 99-year leases in 2005 and Ras Al Khaimah, Ajman, Sharjah, Umm Al Quwain, Fujairah and Al Ain offering a mixture of both.
The legal framework of purchasing property in Dubai has developed considerably between 2002 and 2010, and the creation of the Real Estate Regulatory Agency (RERA) in 2007 was a crucial step in the supervision of Dubai’s real estate regulatory framework. Properties will be Freehold or Leasehold with a tenure from 30-99 years.
The buying procedure is relatively straightforward compared to more mature markets but it is extremely important to work with a qualified professional who will be proficient every step of the way. We have provided a basic guide to the process below but would highly recommend that you book a consultation with one our qualified property experts in order to fully understand and be comfortable to proceed, particularly if you are a first time buyer in the Emirates.
It is not necessary to employ a lawyer although some buyers choose to seek the comfort of their services, and conveyancing is becoming more commonplace. There are numerous banks that will provide financing and it is advisable to seek mortgage pre-approval before embarking on your search as the majority of sellers will not entertain an offer without it. You also need to be aware that not all banks will lend on every property so you should check with a mortgage advisor on this.
Once you are in a position to purchase, you need to source your desired property. We recommend that you appoint a reliable and professional agent to represent you in your search for reasons described in our Buyer Representation section. Prime Places is owned and run by an Accredited Buyer Representative and member of the National Association of Realtors.
When the property has been identified your agent will submit an offer on your behalf. On acceptance of the offer by the seller a Memorandum of Understanding (MOU) or Agreement of Sale is signed by both parties and a deposit, usually 10%, paid by the Buyer. The MOU will state the conditions and timescale to be adhered to by both parties.
In addition to the purchase price, there are other costs to take into account;
- Transfer Fee – 4% of the purchase price plus administrative charges payable to the Dubai Land Department on the day of transfer in the form of a Managers Cheque. Responsibility for payment of this is agreed during the initial negotiations.
- No Objection Certificate (NOC) Fee – a flat charge payable to the developer, the rate of which is determined by the developer and will range from AED 500 to AED 5,000. This is typically paid by the seller.
- Buyer Agency Fee – 2% of the purchase price payable to the Agency on the day of transfer by the buyer in the form of a Managers Cheque.
- Mortgage Registration Fee – 0.25% (Non Islamic Finance) or 1.25% (Islamic Finance) of the buyer’s loan amount payable to the Dubai Land Department on the day of transfer by the buyer in the form of a Managers Cheque.
- Mortgage Discharge Fee – payable to the developer and the Dubai Land Department by the seller.
- Service Charges – the seller’s account should be up to date as defined and required by the developer. Some developers will also require that the account is settled to the end of the year which will be the responsibility of the buyer.
- Conveyancing Services – between AED 6,000 to AED 14,000 depending on the complexity of the transaction.
If you are a cash buyer and the seller has no mortgage then the transaction is fairly straightforward and, having signed the MOU and given a deposit, it will just require that both parties attend the Dubai Land Department on an agreed date to complete the transfer of the property and the seller is paid by way of Managers Cheque.
If you require a mortgage to acquire the property then the process will take a bit longer due to bank procedures. On the day of transfer a bank representative will also need to attend the Dubai Land Department to issue the Managers Cheque for the loan amount alongside the balance due from the buyer, to the seller.
It is worth noting the new UAE Central Bank restrictions that came into force in December 2013. If you are a not a GCC national but are a foreign national resident in Dubai, banks will lend the following on your first property;
- Up to a maximum of 75% of the value of the property if valued at less than AED 5,000,000.
- Up to a maximum of 65% of the value of the property if valued in excess of AED 5,000,000.
Second and subsequent properties will qualify for a maximum of 60% of the value of the property irrespective of the value of the property. This only applies to completed property and not under construction projects.
If you are a cash buyer and the seller has a mortgage, then again the process may take even longer. In this scenario it is especially advisable for you to employ the services of a regulated conveyancing firm or lawyer because once the liability amount has been declared by the seller’s bank, it is expected of the buyer to settle the liability before the bank gives clearance to sell the property. Dubai Land Department will, at this point, “block” the property in their system to safeguard the buyer until the date of transfer.
The expected timescale for the whole transaction is anything between two weeks for a cash to cash purchase and up to 8 weeks when one of the parties has a mortgage.
Dubai does not have a direct taxation system. There is no Capital Gains Tax nor does it levy tax on income derived from letting a property within the Emirate and there is no restriction on the number of properties that one can own.
Residence Visa can be applied for if the property is valued at over AED 1,000,000 and is handed over with Title Deed. This does not give you the right of employment locally nor a tax-free status in your country of domicile. It is renewable every two years.
The only offshore entity that can own a property in Dubai is a company incorporated in the Jebel Ali Free Zone, and the same charges are applicable should the buyer choose to acquire the company and hence the property.
Inheritance is also a serious consideration when buying property in the UAE. If you are a non-muslim then the laws of succession in your own country should be upheld but it is advisable to make a Dubai Will before the Notary Public. This will sit alongside your will in your domicile country and only applies to UAE assets. For more information we can recommend specialists in this field.
For a list of documentation required and the rules for nominating a Power of Attorney, please send us an enquiry.