Dubai is one of the leading real estate hubs in the world, and it is not surprising that everyone wants to own a piece of this thriving city. From lifestyle, convenience, and safety to ease of doing business and opportunities, there are many reasons why people want to invest in this diverse city of the UAE.
However, as with any investment, tapping into the real estate market requires homework. From understanding the market dynamics to finding ideal options with a higher ROI and then getting the legal work covered, owning a property in Dubai requires some standard steps. In this article, we will provide a simple guide on how to buy property in Dubai.
But before we begin, it is essential to discuss the law governing property purchases in Dubai and how it differs for Citizens and foreigners.
The legal framework covering property purchases in Dubai is regulated by Real Estate Law No. 7 of 2006: Land Registration Law.
Article (4) of Law No. 7 of 2006 defines who can own and buy property in Dubai. According to this law, you can purchase real estate anywhere in Dubai if you are (1) A UAE citizen & (2) A GCC citizen.
The same law allows foreigners to buy properties, but only in areas designated for foreign ownership. The rules also differ between the Emirates. So you’ll need to check the rules for Buying property in Dubai.
Foreigners have two ownership rights types: “freehold” and “leasehold”. Buyer rights are the fundamental difference between freehold and leasehold property ownership in Dubai.
If you buy a property on a freehold basis, you are entitled to complete ownership of the property, including the land on which it is built. Meanwhile, property rights are limited to a set period of time for properties purchased on a leasehold basis. Leasehold properties are cheaper, but you must know all the legal restrictions you’ll face if you buy one.
With that background set up, here are five steps to buy a property in Dubai.
The first and foremost step in buying a property in Dubai is understanding your capacity, i.e., how much you can afford to invest. This will help you narrow down your choices and make the process simpler.
Affordability comes down to two categories – (1) If you have enough money, you can buy the property outright. In this case, you will be a cash buyer, and the calculation is fairly obvious. (2) If you don’t have enough money, you will have to borrow, which is often the case for first-time buyers. You must determine how much you could get through a mortgage plan.
How much you can borrow depends on many factors, but here are the three key ones:
Your Income
For this, you will have to prove your income through salary slips, certificates from your employer, or any other evidence of income if you are self-employed. How much you can borrow will depend on primary factors like debt burden ratio (DBR) and lifestyle expenses.
Your Down Payment
Generally, the more money you can put towards your property purchase, the better. This is because you will borrow less, giving you more financial security if you cannot keep up with the mortgage payments.
UAE nationals will need at least 20% of the property’s value as a down payment, whereas expats will need at least 25%.
Your Credit Score
As with any other country, your bank or lender will check your credit score when you apply for a mortgage. The higher the score, the more likely you will be accepted and the more you can borrow at a low-interest rate.
It is important to first take some proper time to understand the goals behind why you want to buy a property in Dubai. It is normal to get carried away by suggestions, recommendations, and trends, but ultimately, all that matters is how the property serves your financial objectives.
Start by considering whether you are buying for personal use or renting out. How many rooms are you looking at? Do you need parking space and large outdoor areas? Or would you be willing to sacrifice a bedroom to get them?
Think about long-term perspectives as well. Moving home is usually expensive, so planning for the future is important. Location also plays a key role in these decisions. Don’t overlook the location for the sake of getting a bigger home. Especially if you are a family with kids and have a corporate job, schools, entertainment, commuting, and other conveniences come into play.
If you’re buying property in the UAE as a rental investment, you may want to prioritise the location’s potential and what type of tenants it would attract.
Once you have understood your financial capacity and analysed if you need to borrow, you will need to get approval in principle from the offering bank or lender.
This is a validation that states you will be able to secure a mortgage up to a certain value based on the information you shared, such as your salary, debt levels, credit score, etc.
To obtain this approval, you must submit a valid passport, visa, or Emirates ID. You will also need an income statement, such as a salary certificate.
Getting an Approval in Principle is much quicker than going for a full mortgage application. It is also often free, will not affect your credit score, and will prove to sellers or agents that you’re serious about buying property in Dubai.
Once you have all these, you can view properties and make offers. Making offers and negotiating can be challenging, but it is important to feel confident and make your pitches effectively. Going through a broker or a reliable financial advisory firm can simplify this process greatly.
They have the expertise and skills to get the best deal with proven negotiating strategies. Also, their knowledge of the industry and market dynamics can help you narrow down the best options that resonate with your budget and other goals with why you want to buy property in Dubai.
Once you have selected your property and made agreements with the seller, you will start processing the mortgage application. The lender or the bank will brief you on the available mortgage options. Make sure you choose one that is right for you.
When you apply for a mortgage, you will be subject to a “Full credit bureau” check, which will be recorded with the Al Etihad Credit Bureau (AECB). Your lender will also need to value your property.
This is the most sensitive part of buying property in Dubai. The legal framework for buying a property in Dubai is precise and straightforward. However, you will need a real estate agent or lawyer to help you through this process, especially for foreigners or expats buying property in Dubai
It is also important to emphasise that these laws vary from one Emirati to another. In Dubai, you’ll need to:
Once you have your title deed, you’re officially your property owner.
Deciding to buy a property in Dubai is indeed a major investment decision. To ensure you are doing it in the best and legally approved way, it is important to pay close attention to the process and the decisions you make throughout.
Remember that even the slightest mishaps in your choices can affect the results you expect from the investment, especially regarding returns.
The rules are different for expats or foreigners who want to buy a property in Dubai, so it is always best to go through financial advisory firms that can help you explore the options and guide you towards the best option that aligns with your financial objectives.
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