U.A.E

A starter’s guide to buying property in the U.A.E.

The UAE’s property phenomenon has to be seen to be believed. From Abu Dhabi to Dubai and Ras Al Khaimah, regional and international buyers still invest enthusiastically, enjoying the easy payment terms and impressive tax-free resale returns that property in the country offers.

This potent mix of conditions continues to drive real estate sales to remarkable levels, though the annual growth in capital appreciation in most emirate markets has fallen when compared to the stratospheric profits made in the early part of the decade.

Nationals across Arabia have embraced this property boom, particularly for off-plan properties, however, it is the meteoric rise of property sales to expatriates, that has captured the imaginations and filled the pockets of real estate companies and government developers.

Incredibly, this growth has happened for the most part in the absence of a firm and all encompassing regulatory framework. It is this lack of maturity, with its plethora of legal challenges, that force would-be investors to personally perform extensive due diligence in advance of buying a property in the region.

Buying a property can, even at the best of times and in a fully regulated situation, be a daunting process. However, in this emerging market, where systems and regulation are still very much in their infancy, you need to be fully armed with as much solidly reliable information as possible. Before you start the hunt for your perfect abode or investment property, equip yourself with the basic tools you need take the first step onto the property ladder.

Which property company?

A good agent can mean the difference between an exceptionally smooth or a disastrous experience in the UAE property market. With a terrifying number of variables surrounding the property purchase process, you need to ensure that you and your funds are in reliable hands.

Transparency is key. Always demand full explanations of fees and costs of sale. Do not feel shy to ask if there are hidden costs. Always remember, property deals that seem too good to be true are generally just that.

When looking for agents to work with in the UAE or your home country, ask for and validate company credentials. Ask if the company is registered with the appropriate Emirati Land Department. It is also useful to ask what the company’s areas of expertise is, and what their range of services is.

If you are a new entrant, or unfamiliar with the market in which you plan to invest, acquire testimonials where possible. If you reside in the country in which you plan to invest, there is no better way to find a suitable agent than word-of-mouth and speaking to people that have already had a positive buying experience.

Your agent

Once you have found the property company or developer you plan to proceed with, you will then be introduced to your agent - the person whose responsibility it is to find and introduce you to the property (and respective owner) of your choice.

Their role also includes the arrangement of the transfer of contract with the existing property owner or developer. Some companies, however, will offer extended real estate services, including property management and leasing, something that you may find extremely useful down the line once your property completes.

Which property?

When deciding what to buy, set your purchasing parameters. Why are you buying? Is this a family home? Is this a pure investment for capital return? Do you want to hold the property longer term to rent out?

The answers to these questions will determine the type and location of the property you plan to buy. Once you have firmly established what you want then brief a selection of property agents and then compare the results they provide. Your real estate consultant can then advise you in terms of the best location to suit your needs and budget.

A site trip is always useful to give you a feel for the area. If you are buying a property to move into, always remember, completion dates in this market do often slip, so keep in regular contact with the developer and they will advise you of project progress on-site.

The costs

When buying a property directly off-plan from the developer, the cost you pay is totally transparent. Your agent will generally be paid a commission by the developer, and you will not be responsible for this. It is only in the case of resale property that fees to real estate agents, and profits to sellers, come into consideration.

An agency fee of 3 per cent of the Net selling price is standard, however this can drop to as little as 1 per cent, depending on the type of property and the value of the overall purchase. Remember, no cost should be hidden in a property deal. Demand complete transparency from your agent from the start.

Additional costs include ownership transfer and registration with the appropriate Land Department: On purchase, the buyer will pay a transfer of contract cost. This is generally 2 per cent (but ranges from one to eight per cent) of the original price of the property. However, this varies, depending on the developer. Post-purchase and completion, there will also be an approximate cost of 1.5 per cent to register your property with the Land Department.

The legalities

Once having decided to proceed to purchase a property, few people use a solicitor. This is due to the fact that property transfers and contract exchanges are mediated by the relevant property developer and the Land Department. Strict transfer procedures are adhered to by these parties.

This said, you must carefully read all contracts and fully understand the content before you sign anything. Also, be aware of land registration and any extra fees that may be payable on the day of transfer. Your agent can advise you on this process in detail also.