Dubai is an excellent place for real estate investment for many reasons. Per square foot, property prices are lower than in many other cities around the world. Moreover, it provides a higher rental yield; you can expect to achieve yields between 5% and 9%.
Even if you are an expat, you can get a higher level of returns that you would not find in any other prime locations. The greater ROI is coupled with convenient and flexible regulations, making Dubai a great prospect for real estate investment.
It is a big city, and there are a lot of things to consider when choosing investment options in Dubai. And in the article, we will help you make an informed decision.
What Are The Types Of Properties Available In Dubai?
Following are real investment options in Dubai you will come across :
1. Freehold Properties
Freehold properties are highly sought out by expats for residential purposes. The freeholder owns the property outright that includes the land it is built on.
With these properties, you do not have to worry about the lease running out, dealing with the landlord, or paying rent services charges or landlord charges, etc.
2. Commonhold Properties
They are basically condominiums in different parts. Investing in a commonhold property offers you the right to buying, renting, or selling the property for inheritance purposes. These properties share a lot of similarities with apartments.
So you will have to bear property maintenance fees of the building and common areas. These buildings are generally owned by property developers of a real estate developer.
If you want to invest in a commonhold property, you will have to buy it through a UAE government-approved real estate developer.
3. Usufruct Properties
This is another type of property, which is common in Dubai. This type of property focuses on offering a lease for a long time period. After purchasing the property, you can do whatever you want with it and have a life of up to 100 years.
When buying usufruct properties, it depends on whether or not you want to invest in commercial or residential property.
‘Additionally, your negotiation skills will also play an important role here.
Factors To Consider When Buying Real Estate In Dubai
1. Market Research
Dubai encompasses a lot of interesting investment options in Dubai, and this could make it confusing for you to make a definite decision. This is why the first step should be to do thorough research on your market.
To start with, read about the existing trends, patterns, and predictions of the real estate market and financial investment. The more comprehensive your research, the better deal you are likely to get.
After researching how the market is performing and its trend, you need to direct your research to be more specific. Location is one of the prominent factors that will help you make the right investment decision. For instance, if you are looking for a premium location, then you should know prime locations in the city. Looking for a good location will allow you to improve your lifestyle.
Prior to making a real estate decision, you should consider the overall tenure till which you plan to be in Dubai. This duration will assist in evaluating the overall value that you can obtain from potential return on investment.
However, if you are not sure about your long-term plans, then renting the property is a smarter decision.
4. Rental Yields
Buying a property or flat in Dubai means you can offer it for rent and gain further monetary benefits. So, the rent can help you cover the mortgage as well as maintenance expenses.
Therefore, you should consider the rental yields that a property offers. Buying a property in a good location can allow you to gain higher rental yields.
When buying a home, your housing expenses should not exceed over 25% of the total income. Therefore, affordability is another factor that you should consider when buying a property. Consider the upfront fees that you have to pay for the property; it would account for around 6%-7% of the overall purchase price.
It is imperative to closely monitor the maintenance fees and annual services charges. When your finances are organized, you are likely to be dealing with financial complications in the later stages.
5. Residence Visa
A Residency visa is not compulsory to buy a property in Dubai irrespective of the value, but it can fasten the process. Residential visas come in two types in UAE.
The first is a six-month, multi-entry visa, and the other is a two-year visa for residency. Moreover, if you were buying a property for AED 5 million or above without a certain mortgage value and retained the property for at least 36 months can help in getting a residence visa for five years or more. But there are certain specific eligibility conditions that need to be fulfilled.
How Much Does It Cost To Buy A Property in Dubai?
Along with the cost of the property, expats will have to bear other costs as well that include
- NOC fees generally range between AED 500 and AED 5000. You can directly pay it to the property or real estate developer.
- You have to pay for the registration of the property, which accounts for 4% of the overall purchase price of the property.
- You have to pay a commission to the real estate agent. This cost could be approximately 2% of the price of the property you have purchased.
- Expatriates who want to buy a real estate property that is worth below AED 5 million can borrow approximately 80% of the overall property value. On the other hand, UAE citizens can borrow about 85% of the property value.
- Expatriates who are buying a real estate property valued at AED 5 million or above for the first time, then you may be able to borrow 65% of the property value. On the other hand, UAE citizens who are first-time buyers can borrow around 70% of the property value.
- For the second purchase, ex-pats have the option of borrowing approximately 60% of the property value.
- Buyers who are off-plan properties need to make a 50% deposit.
- A buyer must not have a debt-to-income ratio of over 50%.
- The mortgage period should not increase by over 25 years and there is a certain age limit which is 60 for salaried and 75 years for self-employed.
- Expats have options to make an application for a certain loan amount that should not go over the annual income of revenue by seven times.
How To Get Mortgage In The UAE?
Buying a property requires you to make a significant investment. And it is not possible to always have that kind of money. This is where a mortgage loan proves to be helpful.
You can liaise with a reputed financial institution to get reliable advice regarding financing the property. By leveraging expert advice, you will be making a more informed decision.
The professionals will also provide you with all the investment options in Dubai based on your circumstances.
Related: Check Mortgage Rates in UAE
What Documents do You Need To Purchase Property In Dubai?
Following are the documentation you need to fulfill before you can own property –
1. A Buyer And Seller Agreement
After you have decided on the property you want to purchase, you need to negotiate and lay out the sales term with the seller. Your negotiation skills can help you get a better deal on the purchase of the property. Once the contract is made, make sure you read it through so that there is no ambiguity.
2. The No Objection Certificate
You need to make an appointment with the developer’s office to get the NOC. Without this document, you will not be able to get ownership of the property. Moreover, you will have to pay certain fees to get the No Objection Certificate.
3. Affecting The Transfer Process
After getting the NOC, that final step is to meet the seller to affect the transfer. For this process, you should submit the following documents –
- The identification documents of seller and buyer such as passport, visa, and Emirates ID.
- A Cheque from the manager for the property value that the buyer needs to pay to the seller.
- The No Objection Certificate provided by the developer.
- Signed Contract of MOU (Memorandum of Understanding)
What Are The Property Taxes In Dubai?
There are no property taxes in Dubai, making it an ideal destination for buying a property. While you do not have to pay for taxes, the government levies certain monthly housing fees known as the municipality tax.
Additionally, house owners also need to pay a transfer fee of 4%. You will need to pay 5% of the average rental value in a particular area to the Dubai Land Department.
Buying property in Dubai can be highly profitable as there are tons of options, the process is extremely simple, and there is no heavy taxation.
The way you make use of investment options in Dubai will determine the kind of yield you will get from the same. And above, we have included all the necessary information that you can refer to when buying a property in Dubai.