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Related Information (FAQ)
How easy is it to buy and sell property in Dubai?
Very easy, but the present system for buying and selling property is not one which is
likely to be familiar to many global investors. Typically most countries that use Common
Law require a lawyer to represent each party or a public official in Civil Law jurisdictions.
In Dubai you can buy straight from the developer “off-plan” for little or no fees;
alternatively you can buy direct from another private vendor in the secondary market,
whether the property has been completed or not. There is an extremely buoyant market
as demand currently exceeds supply and you will be able to sell your property in the
secondary market before completion or after the property has been built. However many
property developers require their consent to sale and purchases, and may also charge a
transfer fee.
Are there any Legal costs in purchasing a property?
No, there are no legal costs involved since your contract is direct with the developer.
There are only legal costs incurred if you decide to ask a lawyer to act on your behalf.
What deposit is required?
Normally for apartments the developer asks for either a 10%, 15% or 20% deposit. The remainder of the funds will be equired over the building term in stage payments, often 10% every three months for apartments. For villas, it ranges from a 10 – 30% deposit with the remainder of the funds paid on ompletion.
Will the property be Freehold?Most of the developments are offering freehold properties and your contract confirms this. The law is currently being passed through the courts. However it has not been finalised to date. It is understood that the freehold title announced by H.H. General
Sheikh Mohammed bin Rashid Al Maktoum in 2002 shall be freehold as is understood in the international sense - where the owner is considered to have absolute rights to the property.
Currently the developers register the property to the buyers.
When will the Dubai
Municipality register the property?
There is no registration of title being carried out by developers in Dubai yet with the Land
Registry. Instead, the property is registered to the purchaser. Once the new land
legislation becomes law, then it is expected that the land department will be empowered
to register land titles in favour of foreigners for a registration fee of 2% of the purchase
price, or valuation, whichever is the higher – usually paid 0.5% by the vendor and 1.5% by the buyer. The Land Registry has now been established, and staff have been allocated to developments in order to cope with the title demands when developments
complete.
Can I get a residency visa when I purchase a property?
It is possible to apply for a residency visa when you purchase a property. All visas are
sponsored by the property developer and are renewable every 3 years at a cost of
approximately 5000AED. You are only able to get a visa for the family if the property
which you are purchasing is big enough to house the family comfortably. i.e. 2 bedrooms
will only be for adult and 2 children maximum, studio flat will only get a visa for a single
person or couple. These visas will only enable you to reside in Dubai, not work here.
How much are maintenance fees?
Maintenance fees for apartments range from 4AED – 9AED per sq ft of your apartment
per annum. This will be advised to you at the time of purchase. For villas, the
maintenance fees are typically 600 AED – 800 AED per month. They tend to be fixed for
3 years after which a Residents Association is formed.
Can I come and visit the property before I buy?
Of course it is possible to come out and view the property before you purchase. Just
remember that developments tend to sell out 18 months before they complete, so it may
be that you can only see the area where it is going to be rather than the building itself.
What is the rental yield I can expect?
Currently in Dubai there is a healthy rental market especially to foreigners and rental
yields are between 8-10%. Obviously, in time, with all the apartments which will be
available to rent, and as capital values rise, yields may drop to somewhere nearer 6-8%.
It is worth bearing in mind that currently there is a shortage of property to either rent or to
buy to live in and many developments will not be available to live in until the end of 2006.
The current building programme is only expected to meet current demand. However, 20
companies a day open up in Dubai and it is anticipated that the population will double by
2010, which will keep demand high for many years to come.
Can you arrange finance for me?
We can introduce you to companies that can assist you in arranging finance in Dubai.
Most of the bank’s offer 70% ‘loan to original developer sale price’ mortgages and the
rates tend to range from 6 – 8%.
Are there any legal safeguards for foreign investors in the case of non-completion
or poor construction work by the developer?
Yes, there are codes of standards applied by the Dubai Municipality regarding building
permits and contractual clauses. The developer will have to maintain the standards as
stipulated in the regulations issued with regards to building construction, and also safety
issues. In the event of a problem, assistance can be found from the contract entered into
with the developer. This may contain building covenants which often provide a
guarantee of workmanship of 10 years. There is also the civil code of the UAE which
contains protection regarding building standards.
How far will Dubai go in opening up its property market to foreigners?
There is no suggestion of Dubai becoming a completely open market to foreigners in
order to protect local nationals. Restricting foreign ownership of property is by no means
unique; plenty of other countries worldwide have such restrictive practices and, by these
standards, Dubai has an open market. Yet, you should be aware that Dubai restricts
foreign property ownership by identifying certain geographical areas in which inward
foreign investment may be permitted. This has the effect of restricting the development
of land that can be purchased by foreigners to certain areas, and the limited supply
actually available to the developers is likely to continue to cause prices to rise. After all,
85% of the population of Dubai are foreigners!
Are there inheritance issues in Dubai about property?
Few people realise that whenever they purchase property outside their original country
of residence where they are most likely to have a will, that the property in the country in
which they have purchased, is covered only by local laws. Dubai is no different, and the
inheritance of property in the UAE is covered under Shariah Law. This stipulates that in
the event of a mans' death, property would pass automatically to the eldest son in the
family and not necessarily the mans' spouse, even if the property is jointly owned by
husband and wife.
Advice from a variety of locally based law firms produces different recommendations,
including putting in place a local will in the UAE if you are a resident, or adding a codicil
as a supplement to your existing overseas will indicating that any assets you own in the
UAE should be covered by laws of the will in the jurisdiction in which it was originally
written. Some solicitors have also advised that this will and codicil should then be
notarized by the UAE Embassy in the country in which the will was written, in the event
that an inheritance dispute ends up in the law courts of Dubai.
Another option is purchasing the property through an offshore or service company in
order that the shares of that company may be gifted to your chosen beneficiaries under
the terms of your will. In any event, we strongly advise that you talk your own lawyer and
a local UAE based lawyer (who we can introduce you to) on purchasing your property.
Always get an expert opinion if you are uncertain.
E&OE
Len van der Walt (T)+27 21 863 1521 |
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