If you’re contemplating acquiring real estate in Dubai, renowned for its impressive skyline and opulent lifestyle, this guide will navigate you through the legalities of the process.
Understanding the legal framework is paramount when considering the purchase of a villa or apartment. The cornerstone of property ownership in Dubai is encapsulated in Law No. 7 of 2006.
Article (4) of this law delineates the eligibility criteria for property acquisition in Dubai. It states that real estate can be purchased by anyone in Dubai, with non-residents and foreign nationals restricted to designated areas as per Article 3 of Regulation No. 3 of 2006, which allows freehold property ownership only in certain zones.
Dubai’s property market offers two principal ownership models: freehold and leasehold. Freehold ownership bestows comprehensive rights, including the liberty to utilise, lease, or sell the property. Conversely, leasehold ownership confers rights for a predetermined duration, typically not exceeding 99 years.
The distinction between freehold and leasehold lies in the extent of the buyer’s rights. Leasehold ownership limits property rights to a fixed term, whereas freehold ownership imparts absolute rights over the property and its land.
When deliberating between the two, it’s essential to align your choice with your long-term aspirations, investment goals, and financial plan. Freehold properties tend to offer more flexibility and capital growth potential, while leasehold properties might present lower initial costs and higher rental returns.
The acquisition process in Dubai is relatively streamlined, whether for personal habitation or investment purposes.
There are four key legal stages in the property buying process in Dubai:
The real estate market in Dubai has commissioned certain regulations to protect buyers and sellers. Hence, one needs to pay upfront fees which is different from the cost of the property itself. The upfront fees may depend on the type of property and therefore be different for different areas and property types.
Buying property in Dubai fees includes Dubai Land Department (DLD) fees. It can be considered as a one-time tax paid to the government. DLD fee is 4% of the total price of the property. DLD fees in Dubai is legally divided between the buyer and seller which is 50% each. However, in most cases, it is entirely paid by the property buyer.
Along with the mandatory Dubai DLD fees, buyers are also required to pay the property registration fees, which depend on the value of the property. The buyers purchasing property with the help of bank loans also need to pay the mortgage registration fees with DLD.
Here is the division of transfer and registration fees:
DLD Fees = 4% of the property price + Admin fees (AED 580 for apartments and offices, AED 430 for land, AED 40 for off-plan)
Registration Fees for properties valued below AED 500,000 = AED 2000 + 5% VAT
Registration Fees for properties valued above AED 500,000 = AED 4000 + 5% VAT
Mortgage registration fees Dubai Land Department = Up to 0.25% of loan amount + AED 290
It is crucial to know that DLD fees need to be paid within 60 days otherwise the purchase stands cancelled. Also, people not opting for bank loans need do not pay any mortgage registration fees.
If you are buying a property through a real estate agent, then you will be liable to pay their commission. An experienced agent will help the buyers make wise and informed decisions throughout their journey.
To ease the overall purchase, buyers also hire a conveyancer. They are the experts that ensure your documentation and contracts are up to date as per the UAE laws.
The expenses here can be split as:
Agency fees = 2% of property price + 5% VAT
Conveyance fees = AED 6000 to AED 10,000 (Approx.)
In order to secure the purchase, the buyers have to pay a specific security deposit, till the property is completely transferred. The initial security deposit is usually 10% of the property price or more, depending on the property. The amount is usually collected by a RERA registered broker.
In summary, the Dubai real estate market has shown robust growth, with significant sales transactions recorded over the past year. The process for off-plan property purchases differs slightly, but regardless, it’s a substantial financial commitment that warrants careful consideration of the advantages and disadvantages.
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