- Despite predictions saying the Dubai property market will remain weak in 2021, there have been 3,036 first-time property investors during the first two months of the year – a significant 62% gain on the 2020 numbers.
Thinking about the process of buying property can be overwhelming for first-timers. Regardless of where you are, there are legal steps you need to take and be aware of before purchasing land; and Dubai is no different. Let’s take a look at this guide on the process of buying property in Dubai both for cash and mortgage buyers.
Who can buy property in Dubai?
Anyone over the age of 21 can buy property in Dubai. May they be a local, a GCC national, or a foreign investor as long as they are of sound mind.
Leasehold vs Freehold
Foreign nationals are allowed to buy properties on a leasehold or freehold basis but only in designated areas for foreign property ownership. Some of the leasehold areas in Dubai are in Dubai Silicon Oasis and Green Community while some freehold areas are in Downton, JVC, Business Bay, and MBR.
Leasehold (long-term lease) allows the buyer to have rights over the property (but not the land it is built on) for the duration of up to 99 years, after which the property is returned to the landowner. In this proprietorship, any remodeling, alterations, and renovation must first be approved by the landowner. However, in most cases, the liabilities for any repair, especially if they affect the structure of the property are shouldered by the landowner, as well.
Freehold allows the buyer free reign over the property and land without a time limit. This was issued in May 2002 by the then crown prince of Dubai, His Highness Sheikh Mohammed Bin Rashid Al Maktoum. In this proprietorship, all liabilities for repair fall on the freehold owner but with free reign over any renovations and restructuring and whether or not they want to sell, lease or occupy the property at their discretion.
In the case of inheritance, properties in leasehold ownership can be inherited based on the remaining life of the lease while freehold properties can stay in the family forever.
Finding the best property for you
As a property buyer, finding the perfect location that meets all your lifestyle needs is a very important first step. Explore the numerous communities and developments in the city and look for one that makes you feel at home or guarantees the best returns. While there are endless options all with unique characteristics, setting a purpose for the property will help you choose the appropriate area, size, and budget.
If you don’t know where to start, relying on a trusted property broker is your best bet. Key One Realty Group is a premier real estate solutions provider with a reputation for excellence. We are committed to providing you the best service, answer all of your inquiries, let you know what to expect, and help you begin the process of making your purchase.
The overall process of buying a property is the same, however specific steps that must be taken differ according to the buyer’s method of payment and if the property has a mortgage against it. Once you find the property you want to purchase, a contract between you (buyer) and the seller (Contract F) is issued and the process begins:
a. Cash buyer – Mortgage Free Property
Usually, the fastest and easiest type of transaction.
After the buyer and seller sign contract F, a Booking Deposit is submitted by the buyer and the seller issues a Security Cheque against it. The seller then applies for the No Objection Certificate (NOC) from the master developer and once approved, both buyer and seller proceed to the Registration Trustee (RT) to transfer the property Title Deed to the buyer.
In case the property does not have a Title Deed, the seller must apply and pay 4% of the original price of the property before the deed can be transferred to the buyer. If the property is “off plan”, the seller must apply and pay 4% of the selling price before he can sell the property.
b. Cash buyer – Mortgaged Property / Off Plan Property / Delayed Sale
When there is an existing mortgage/loan on the property, the outstanding loan must be settled before transferring the Title Deed to the buyer.
A Liability Letter from the bank or developer must be addressed to the Dubai Land Department (DLD) and should include the details of the property as mentioned on the deed, the outstanding balance of the seller’s mortgage, and an undertaking statement from the bank to release the mortgage once the outstanding balance on the property is settled. Liability letters have a fixed validity period of 7-15 days in which the buyer should be prepared to settle the mortgage.
After this, Contract F is signed by the buyer and seller and the cheques required are submitted. Upon approval, an NOC from the developer is acquired and the new Title Deed in the name of the buyer is transferred through the RT.
c. Mortgaged Buyer – Mortgage Free Property
If the buyer needs financing, a pre-approval letter should be placed prior to looking at properties. Once Contract F has been signed and the booking deposit has been submitted, the buyer’s bank conducts a valuation (appraisal) of the property and then issues a Final Offer Letter (FOL) to the buyer. Both parties then apply for an NOC from the master developer and proceed to the RT for the Title Deed to be transferred to the buyer’s bank. (The property is owned by the buyer but the bank holds the deed for the duration of the loan.)
d. Mortgaged Buyer – Mortgaged Property
After both parties sign Contract F and the booking deposit is submitted, the buyer’s bank conducts an appraisal of the property and the FOL is signed. The seller proceeds to apply for a Liability letter from their bank and is then transferred to the buyer’s bank which will start the process of settling the existing mortgage. Once it is settled, the original Title Deed held by the seller’s bank is released to the buyer’s bank and both parties request an NOC from the developer. Once this has been obtained, the seller prepares the final documentation for the transfer of the property.
At transfer, the buyer’s bank will either issue a cheque for the remaining amount to the seller or issue a Guarantee Letter for the same amount. The mortgaged is then registered and the Title Deed is held by the bank until the mortgage is paid in full.
The following Manager Cheques and Fees issued are as follows:
- A manager cheque payable to the bank to settle the outstanding mortgage.
- A manager cheque payable to the seller for the remaining balance.
- A manager cheque payable to DLD for the transfer: 2% + AED 20 split between buyer and seller unless agreed otherwise.
RT Fees:
- AED 4,000 for a completed property if the price is AED 500,000 or more. If the property is off-plan, the fee is AED 5,000.
- AED 2,000 if the price of the property is less than AED 500,000 and if the property is off-plan, the fee is AED 3,500.
DLD Fees:
- AED 1,290 mortgage release fees.
- Buyer’s expense of 0.25% of the mortgage value for the registration of the mortgage against the property
For more information, contact us at https://keyonerealtygroup.com/contact/.