Property Purchase Process | Property Purchase Costs | Mortgage Finance

In Dubai, investors must bear the following costs when buying property.

The Sale Registration fee - 1% each for buyer and seller, is paid to the Land Department of the Government of Dubai.
Title Deed - Issuance of Title Deed by the Land Department costs AED250 (£34). For issuance of a Title Deed through establishment of ownership of land for which no Title Deed was issued before, the cost is AED5,000 (£690).
Lawyer’s fees - Legal fees are unavoidable, no matter which country you buy in. Make sure you discuss the rate of pay with your lawyer before proceeding with any purchases.
Real estate broker's fee - The broker's fee ranges from 1% to 5% of purchase price, depending on the type of property and the overall purchase price.
Mortgage fees - At present local lenders charge around 1%-2% of the value of the loan as a processing fee.

Apart from the above, there are no further charges associated with buying property in Dubai. That means no stamp duty, property transfer taxes, capital gains taxes and tax on earned income from the property.

Finding the right property

Ideally you should visit your selected area and meet with estate agents who will show you round a selection of properties which match your criteria, rather than rely solely on a brochure or website.

It’s useful to go in prepared with a checklist, then take notes and photos as you walk around. It’s also always a good idea to talk to other British owners in the area.

Organising legal representation

The property purchase process in Dubai is still in its early stages and as yet has not developed a fully formal convincing procedure. At this point the only required paperwork is a sales agreement which, once signed, is legally binding.

Although the buying process seems straightforward, there can be potential pitfalls and we strongly advise you to appoint an English-speaking lawyer to act on your behalf.

Reservation and deposit

Once you have found a property, you will probably be asked to sign a reservation form and/or pay a booking deposit. It is important to ask if this deposit is refundable or not.

The survey

Although a survey is not a compulsory part of the purchase process in Dubai, a survey is nonetheless advisable for your own peace of mind as well as giving you an idea of what to budget for in terms of renovation and repairs. A survey is particularly advisable if you are buying a property without a builder’s warranty.

Important things to check include:

• The plan of the land at the land registry and the plan of the building which should be included with the property details.
• The land boundaries and whether there is any construction work planned on the land neighbouring the property.
• Don’t just believe what it says on the plan or in the details. Check for yourself, as any discrepancy could work to your advantage in any negotiations over price.

A full structural survey will usually cover all the main issues.

Organising finance

When working out how to finance your purchase, consider all the options. Paying cash, if you can afford to, is often recommended, but you may not want to tie up a relatively large sum in this way. The other options include re-mortgaging your UK home or arranging a mortgage on your Dubai property through a local or UK lender.

Re-mortgaging offers the easiest solution. Releasing equity in a UK home means that the second home can be purchased for cash, without the need for another mortgage. However, this may only be feasible for those who own their first home outright. Several UK mortgage providers will lend funds of up to 80 per cent of the purchase price for second home purchase.

Making an offer

Verbal offers are commonplace in Dubai, though written offers are also permissible.

Signing a private contract

Once the verbal offer has been accepted, an initial real estate contract is drawn up and signed by both parties. Before signing, it is advisable to consult a local lawyer or one familiar with Dubai, since, once signed, the document becomes legally binding.

To secure the property, a holding deposit of anything from £1,000 to £3,000 is usually requested.

After this, a purchase contract stipulating the payment schedule is drawn up. The usual conditions for buying a property under construction are between 10% and 20% to be paid every three months until completion, and the build time is normally 12 to 36 months.

The property can be sold at any time during this period, but will incur a transfer cost of about 2%. This deposit is non-refundable unless the seller of the property is subsequently unable to sell to the buyer for any reason.

Legal investigation

Title searches are a must in every real estate transaction worldwide. As the conveyancing system in Dubai is still in its infancy, the central land registry has no records of previous sales to confirm title deed to the property and therefore buying resale properties is a little more complicated.

It is essential for your lawyer to investigate and contact the original developer to ensure the title to the property is genuine. Once the title is confirmed, the purchaser will put down a holding deposit until the funds are in place for the sale to go through.

Completion

The property will only be considered yours once you have registered it. A buyer is required to sign an agreement with a developer to pay the property price with all the transaction costs.

This letter is then submitted to the Dubai Land and Properties Department on behalf of the buyer, stating that all payments have been completed. Only after this letter has been accepted will the property be registered in your name.

Registration of title

The Title Deeds are registered to the new owner at the Lands Department only when he has paid for the property in full.

The role of your lawyer

Your lawyer should:

Review the preliminary contract to ensure compliance with laws of relevant Dubai jurisdiction.
Conduct due diligence checks on the developer of the property to check planning permission, land registry, building permits and licenses.
Negotiate with the developer on any issues affecting the purchase.
Examine the contract as a whole, highlighting any issues with missing/negotiable contract clauses.
Ensure all land registration deeds and title deeds over the property are fully checked.
Check that the land on which the property has been built has been designated as allowable for foreign ownership.

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