Purchasing Property in Dubai

Considering purchasing a property in Dubai for personal or investment purposes?

Here is a detailed breakdown of the rule and regulations that govern property purchase in Dubai.

Dubai’s laws are regulated by Real Estate Law N0. 7 of 2006: Land Registration Law. Under article (4) of this Law, it outlines who is eligible to purchase real estate in Dubai.

If you are a UAE Citizen or GCC Citizen, you are able to purchase anywhere in the Dubai. The law pertaining to foreigners allows residence and non-residence to purchase real estate only in designated areas zoned for foreign property ownership. There are 2 types of foreign property ownership:

• Freehold – complete ownership of the property and the land on which it is built.
• Leasehold – ownership for a set period of time

The Process

Step 1 – Find your ideal property

Prior to starting your search, it is recommended to decide your means of purchase, whether you will be purchasing a property with cash or mortgage.

If you require a mortgage, it is best to speak to your bank or a mortgage consultant to discuss your purchasing power. Once you understand your budget you can then narrow down the type of property and area you will be able to purchase in.

It is always recommended to work with a reputable agent, they will be able to advise you on the sort of area your budget would best be suited for. They will have first-hand knowledge of the area/community, and will advise you on the current market price and best way forward with your search. When searching for an agent, look for someone who specializes in the area or type of property you are considering purchasing.

He/she is there to negotiate on your behalf with the seller or seller’s agent. They will be knowledgeable of all the laws and documentation required to purchase a property.

Step 2 – Agreement of Sale

Once you have decided on the which property you want to purchase, and the price has been agreed, a Form F needs to be prepared. This is a Memorandum of Understanding (MOU), it is a legally binding document that states the property is going to be purchase by buyer X from seller Y for an agreed price.

It outlines the terms and conditions of the sale and an agreed transfer date for the sale of the property.

Depending on whether it is a cash to cash, cash to mortgage, mortgage to cash or mortgage to mortgage deal, the time it takes to transfer can vary. Usually cash to cash can be completed in a few days while mortgage to mortgage could take a few months depending on the requirements of the banks involved.

At the time of signing the MOU, both parties are required to put a 10% deposit cheque down. This is to secure both parties and is used as insurance to keep either party from backing out before transfer. These cheques are handed over to the agent and kept in escrow till day of transfer.

On day of transfer (as stated on the MOU) both parties will meet at the Registration Trustee Office to complete transfer. At this point both deposit cheques will be returned to the buyer and seller and the buyer’s bank will issue bank manager cheques to the relative parties.

It’s also important to note that when purchasing a property where the seller has a mortgage registered, the buyer will first need to pay out the seller’s mortgage to receive a No Objection Certificate (NOC) in order to process the property transfer with the DLD. The NOC, which is a legal certificate, states that the seller has paid all service charges and other fees, and that the developer has no objection to the sale.

(It is highly recommended that you take on a legal advisor familiar with local property laws to oversee the transaction. Appointing a licensed conveyancer will ensure that all documentation, contracts and financial arrangements associated with the transaction are legally in order.)

Step 3 – Documents for Transfer.

At day of transfer you will be need the following documents:

• NOC from the developer (Issued by the seller)
• Manager’s cheques for the property price payable to the seller.
• Original identification of buyer and seller (Emirates ID, Passport and visa)
• Signed Form F (MOU)

Purchasing Off-Plan

• The buyer and the developer agree on the terms of the sale and the property price
• A reservation agreement is signed and the buyer pays the reservation fee and/or the first installment of the purchase price, the amount of which is specified by the terms of the agreement
• A Sales & Purchase Agreement (SPA) is signed, which includes the expected completion date of the property
• Once the SPA has been signed, an Oqood document is issued, which serves as a temporary registration until the buyer has the title deed in hand. An Oqood fee is also paid at this time, which is typically 4% of the purchase price.
• The buyer continues to pay timely installments as per the approved payment plan until the balance has been fully paid
• Once the property is completed, the Oqood becomes a title deed in the name of the new property owner

Additional Fee to Consider

Government Fees

• Dubai Land Department fees – 4% of the property value + AED 430 for land or AED 40 for off-plan or AED 580 admin fee for apartments and offices

Property Registration Fee

• Properties value below AED 500,000: AED 2,000 +5% VAT
• Properties value above AED 500,000: AED 4,000 + 5% VAT
• Fees for issuing the Title Deed – AED 250

Agency fees

• 2% of the purchase price plus 5% VAT
• Conveyancing fee AED6,000 – AED10,000

Mortgage fees

• Bank mortgage arrangement fee – 1% of the mortgage amount plus 5%
• Property valuation fee AED2,500 – AED3,500

Service Fees

Once the transaction has settled and the property ownership has been transferred, there is an additional expense to consider – service fees. Annual maintenance charges on a property are payable to the Dubai Land Department based on the RERA Service Charge and Maintenance Index. This index determines a specific charge per square foot and varies by community. Up to date fees can be sourced directly from the DLD’s website. This amount contributes towards the upkeep of common areas of a building or community, for example elevators, landscaping, security, swimming pools, etc.