First things first, while many UAE property developers have a reputation that revolves around a transparent and trouble-free property purchase process, that does not mean it is safe to enter into any form of property transaction without the support of an independent lawyer. There are many complexities associated with the purchase of property here, whether that property is off plan, completed or resale, so always remember to seek independent legal advice.
Read the small print
The terms and conditions that mortgage lenders enforce vary from lender to lender. Don’t be fooled into thinking that by entering into a mortgage contract you ‘only’ run the risk of losing the home on which the mortgage is based – this is not always the case. You could even end up losing existing assets not linked to your new property. Always thoroughly check the small print, otherwise you could end up in financial dire straits.
It’s never a sure bet
Some countries have already suffered from negative equity (which means that property will now cost less than what the owner paid for it). The UAE is still an immature and emerging market that has never had to suffer economic, social or political change to any significant degree. However, to lessen your worries somewhat, international property analysts agree that there is huge potential for growth in the brand new real-estate market in the UAE for several years.
Ask for an example
If you intend to buy off plan, it doesn’t mean that you shouldn’t be able to see what type of property you’d be getting. Ask the building company to show you similar properties they’ve completed. This way you’ll know what sort of finishes you can expect and what level of standards you’ll get for your money.
No hidden taxes
Unlike elsewhere in the world, you pay no stamp duty on UAE property. This could be up to four per cent of the price of your property elsewhere in the world, so it’s definitely a big bonus.
Don’t forget the deposit…
Expect to put down a deposit from five-15 per cent on any residential property under construction and pay careful attention to the payments schedule. Some are more generous than others, but it is usually possible to obtain mortgage finance that will also cover payments prior to occupation.
…or the fees
If you’re buying a second-hand home, you have to pay transfer fees to transfer ownership. These range from one-seven per cent, so it’s always wise to enquire up front about them to avoid any unpleasant surprises later.
If you buy an apartment or house in the UAE and you decide to rent it out instead of inhabiting it yourself, income tax will not be charged on the rental income you receive. On top of this, if you plan to sell up when it’s time to move on, you will not be charged capital gains tax on your profits.
Cost to factor in
The main charge that you have to include in your budget is the land registration fee (1.5 per cent), which is payable upon completion of the property to the government’s land department. You need to turn up in person to complete the registration process, or you can authorise someone else to register it for you with a notorised power of attorney. From then it will take around a week to issue the title deed.
Another cost you should factor into your finances is commission. Buyers will normally have to pay two per cent of their property value to agents. This is the traditional pattern for rental payments in Dubai and was extended to sales when the right to buy came in.