What is a property transfer fee in Dubai?
A transfer fee is payable if you transfer your property to someone else. It is an administrative charge levied by the primary developer.
Can I get a residency visa when buying a property in Dubai?
You can get a two-year visa when you purchase a property in Dubai that is:
- Completed and handed over to you.
- Worth a minimum value of one million dirhams.
Do I have to pay tax on Dubai property if I am resident abroad?
No, you don't have to pay tax if you are a resident abroad. You only pay if the Dubai property is designed for living in, such as your own home, and student and employee accommodation. Then it is considered residential and exempt for VAT purposes. However, 5% VAT applies to commercial properties.
Everything you need to know about Homeowner Finance (Mortgages)
a) Is homeowner (mortgaging) financing available on freehold properties?
Yes, Home financing is available on all Nakheel real estate projects from Nakheel's home finance subsidiary, Tamweel, and on Emaar projects from Emaar's home finance subsidiary, Amlak. Mashreq Bank also offers mortgages. RAKBank offers mortgages only once the project is completed. A range of other banks and finance institutions are starting to offer mortgages as well. Lending criteria varies at each institution. As of yet, no financing institution is offering mortgages on freehold developments of any private developers.
b) How do I get finance?
Each financial institution has a checklist of loan criteria. The property purchaser will have to fulfill the financial institution's loan criteria and provide the necessary documentation which includes but is not limited to: Copy of passport(s) for property purchaser(s), Bank Statement(s) of property purchaser(s) for 1 year, Credit History - Credit Bureau report (EQUIFAX, D&B etc.), bankers reference, credit card report.
c) When does the financial institution start charging interest?
It depends on the bank. In most cases, interest is accrued during the construction period and the property purchaser will have to pay/clear this amount on handover of the unit. Then the property purchaser will have to repay principal and interest installments for the tenure of the loan.
d) What will be the APR or Interest Rate? What is the compounding method?
Depending on the bank between 5.5% to 6.5% p.a. payable on a declining principal balance. It may be monthly or quarterly.
e) What are the mortgage tenures?
Between 5 to 15 years depending on the financial institution.
f) Do banks or financial institutions send the statement every period to our overseas address?
Yes, which could be monthly or quarterly.
g) Who should we make the payment out to?
Payments should be made out to the name of the property seller for down-payment amounts or to the financial institution for loan repayments.
h) Is a mortgage registered at the Govt. of Dubai Lands Dept.?
Yes, when the property purchaser’s financing becomes a realty mortgage, it will be registered on each property at the Govt. of Dubai Lands Dept. Mortgage Section.
Is there a penalty payable to the property purchaser if the project is not completed on time?
Typically, developers delay the staggered payment schedule if a property is not completed on time.
How much can I borrow?
While resident expatriates can generally borrow between 70% and 80%, non-residents can generally borrow 60% to 70%. It all depends on the lender, and the project they are lending on.
Under what conditions is default defined?
Developers reserve the right to cancel the property reservation agreement and re-possess the title of the property in case of default from the property purchaser. In such a case, the property purchaser typically stands to lose the instalments paid already and 30% of the property value. If the property purchaser delays his installment payment beyond a grace period of normally 30 days from the date when the payment is due, they are usually charged interest at the rate of approximately 6%, and the developer typically reserves his right to cancel the contract.
What is driving real estate demand in Dubai?
a) Liberalisation of the real estate sector - expats can now own property b) High tax-free yields on freehold property rental c) Globalisation and its effects on property prices in metropolitan cities worldwide d) Favourable interest rate environment e) Mortgages & homeowner finance available f) Granting of "permanent" residency upon purchase of freehold properties g) Great Value - Real estate land & apartment valuations are cheap compared to international prices h) Conducive lifestyle: safe, tax haven, secondary and tertiary home for international buyers i) Dubai's robust economic growth p.a.(GDP) j) Dubai's robust population growth p.a. k) Large mid-income population bracket with high disposable income l) Dubai is the regional entrepôt & tourism center m) UAE is an open, welcoming & tolerant state with investor-friendly business policies
What is freehold property?
Freehold property is any estate which is “free from hold” of any entity besides the owner. Hence, the owner of such a property enjoys free ownership for perpetuity and can use the property for any purposes however in accordance with the local regulations. The owner of a freehold title of real estate enjoys the most superior form of private property ownership. A freeholder is considered to be the absolute owner of the land and buildings comprised in his title; he has the right to occupy, use and enjoy his property forever (“in perpetuity”) or until he transfers the title to a new owner, and his heirs are entitled to inherit his title upon his death.
What is the purchase process?
Typically, the prospective Buyer and Seller enter into an MOU, wherein the buyer commits to purchase the property and the seller commits to sell the property. In a purchase transaction, the buyer pays an initial booking deposit (of not more than AED 100,000 for villas and apartments) to the seller. If the buyer withdraws from the transaction, the buyer forfeits his booking deposit. If the seller withdraws from the transaction, the seller refunds the booking deposit amount. The buyer pays the balance considered to the seller upon transfer of the property to the buyer.
What are the procedures involved in re-sales and transfers?
a) Can a property purchaser sell his property?
Most developers allow property owners to re-sell their property; however, some have restrictions on the amount the owner must have paid the developer before re-sale. Developers usually charge owners a transfer fee of 1% to 2% of the value of original list price of the property in order to allow the transfer to a new buyer.
b) How is a transfer made?
In order to allow the transfer to a new buyer, developers usually require a property owner to sign a transfer letter with the new buyer at the developer's office. Developers then usually proceed to issue a new property contract with the new buyer.
c) Does a property purchaser have to be in Dubai to get property transferred?
No, a power of attorney can be appointed to someone in Dubai who may engage in the transfer formalities (the PoA must to be notarized and authenticated by the UAE Embassy in the property owner's country of residence).
d) Is a power of attorney sufficient for the all transactions to be made including transfer?
Yes, to purchase a property, a notarized POA is sufficient. To sell a property, a notarized POA + authentication by the UAE Embassy is sufficient.
What are the maintenance and parking charges?
Service charges, AC and sinking fund is charged per sq. ft. with rates starting from AED 2 per sq. ft. As for parking, it is paid yearly per bay/slot and starts from around AED 1,000.
What is the average size of different units?
Most studios and one-bedroom units are the same size. Some units have balconies and some do not. Sometimes the ones located on the corners of the building are slightly bigger. Retail shops on the ground floor vary in size and are priced accordingly.
- Studios - Size approximately 480 Sq. ft.
- One Bedroom - Size approximately 716 Sq. ft.
- Shops - Size varies, upwards and downwards of approximately 500 Sq. ft.
What documents are filled in to purchase a property on the primary market, i.e., directly from the developer?
The buyer of a freehold property in Dubai only needs to provide a copy of his passport papers to purchase a property in the primary market, i.e., directly from a developer. A company purchasing a property must provide the developer the company's registration documents (Articles of Incorporation, Registration Certificate, POA of the person signing on behalf of the company, and Board of Directors Resolution). Either entity, i.e., a person or a company, needs only to sign a property reservation contract with the developer to purchase a property. On handover of the property to the property purchaser, the property purchaser will have to register his property at the Govt. of Dubai Lands Dept. to obtain a title deed. The property purchaser would be responsible for paying the fees to the Govt. of Dubai Lands Dept. to obtain a title deed (this normally amounts to 2% of the property value). The property value must be fully paid up so as to obtain a Title Deed from the Govt. of Dubai Lands Dept.
Payments - schedule and in favour of whom?
a) What are payment schedules and on-going installments? What is the currency of payment?
There are 4 payment installments methods - Payment Schedules (A, B, C, D) and there is a discount applicable for paying more upfront i.e. Payment Schedule A: Reservation Fee = 10% plus further installments Payment Schedule B: Reservation Fee = 30% plus further installments Payment Schedule C: Reservation Fee = 50% plus further installments Payment Schedule D: 100% paid on reservation. All payments to the building owner must be made in AED (UAE Dirhams). 1 USD = 3.68 AED (fixed rate). The AED fluctuates against the GBP. As on the date of this report the AED 5.56 = 1 GBP.
b) What form of payment is accepted?
Wire Transfer / Bankers Draft / Money Order / Credit Card (at a later date)
c) Does the building owner issue a receipt for every payment paid?
d) Does the building owner send a statement of account to the property purchaser every month?
No, a receipt is sent only when an installment is received.
e) Is there a penalty for late payments?
Yes, if the property purchaser delays a payment, he is charged late payment interest at the rate of LIBOR + 4% (LIBOR is defined as Emirates Interbank Offer Rate which can be looked up in the Financial Times). If the property purchaser delays the payment of 3 installments, the seller reserves the right to cancel the sale and up to 30% of the unit’s value may be forfeited.
f) Who should the payments be made to?
If the property purchaser purchases the unit without financing, then the payment is made in AED via bankers draft or telex transfer to the building owner and NOT to its agents unless specifically authorized in writing by the building owner.
Everything you need to know about UAE Residency Visa
a) Can all family members get a UAE residence visa: i.e. Father, Mother, Father, and children under 18 and unmarried daughters? Yes. Expatriate employees or employers can obtain a residency visa There are three ways they can change their status from an entry permit holder to a resident visa holder: official employment, company registration, and real estate acquisition. Once they have a valid residency permit, male residents can sponsor his spouse and children (under 18 years of age) and any unmarried daughters above the age of 18 years. Expatriate employers are issued residency visa for three years, while expatriate employees are issued residency visa for 1 to 2 years, depending on their labor contract. The UAE cabinet granted long-term visas to certain expatriates such as entrepreneurs, specialized talents and researchers in the knowledge and science field, and outstanding students, with some conditions. b) Who issues the residence visa and is it guaranteed? The Government of Dubai issues it and it is guaranteed as long as the property purchaser owns the property, clears all security and medical tests, and is not rejected by the Ministry of Labor and Social Affairs. c) If the property purchaser is not living in Dubai but plans to in the future, what will be the procedure to obtain a residence visa? The type of residency visa you're entitled to depends on the value of the purchased property. Once the property purchaser buys a property, he/she is automatically entitled to obtain a residence visa. Applying for residency visa can be done either on the website of Federal Authority for Identity and Citizenship (ICA), which is the eChannel for citizenship and residency, or the General Directorate of Residency and Foreigners Affairs (GDRFA), which works under the UAE ministry. d) If the property purchaser is not living in Dubai can they get a visa in a different person’s name such as their employees or other family members etc.? No, only the principal property purchaser gets a residence visa but may sponsor his/her dependents.