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The process of buying a house or any other property can be daunting for first-timers. No matter where in the world you are, there are certain legal aspects linked to investing in real estate that you need to be aware of. The same applies in Dubai. Let’s have a look at how to buy a property in Dubai. Examine the legal procedures that must be followed for this purpose as per the real estate laws.
THE LAW FOR BUYING PROPERTY IN DUBAI
The legal aspects of buying a property in Dubai are regulated by the Real Estate Law No. 7 of 2006: Land Registration Law.
Article (4) of Law No. 7 of 2006 outlines who can buy and own property in Dubai. According to the law, you can purchase real estate anywhere in Dubai if you are:
A UAE citizen
A GCC citizen
Under the same law, foreigners can also buy properties, but only in the areas designated for foreign property ownership. There are different types of property ownership for foreigners in Dubai, including freehold and leasehold. The basic difference between freehold and leasehold property ownership in Dubai is buyer rights.
When you buy a house on a leasehold basis, you will have property rights for a set period of time. However, when you buy a property on a freehold basis, you will have complete ownership of the property and the land on which it is built.
LEGAL STEPS TO BUYING A PROPERTY IN DUBAI
Whether you’re looking for the perfect home to live in or a lucrative real estate investment, the process of buying a property in Dubai is relatively straightforward.
There are four primary legal steps of buying property in Dubai. In the next section, we chronologically break down the legal aspects you need to be aware of to answer how to buy a property in Dubai.
2. SIGNING THE AGREEMENT OF SALE
The second legal step of buying property in Dubai is signing the sale agreement, also known as the Memorandum of Understanding (MOU).
The MOU or Form F is one of the RERA real estate forms in Dubai. Form/Contract F is available on the official website of the Dubai Land Department. Usually, the real estate agent will get the contract ready for you.
Once the contract is ready, both the buyer and the seller have to sign it before a witness (usually the agent) at the Registration Trustee office.
The buyer also needs to pay a standard 10% security deposit on the property to the Registration Trustee, which is returned once the property transfer is finalised.
3. APPLICATION FOR A NO OBJECTION CERTIFICATE
Next up, you and the seller, along with the real estate agent, need to meet at the developer’s office (for example, Dubai Properties, Emaar or other property developers in Dubai).
The objective of this meeting is to apply and pay for a No Objection Certificate (NOC) to transfer the ownership. The developer will issue the NOC only if there are no outstanding service charges on the property.
4. EFFECTING THE OWNERSHIP TRANSFER WITH DLD
Once you’ve obtained the NOC, the last legal step of buying a property in Dubai is meeting the seller at the Dubai Land Department office for the transfer to become effective.
For the property transfer to take effect, you must have the following documents ready with you before visiting the DLD office:
A manager’s cheque for the property price payable to the seller
The original identification documents of buyer and seller (Emirates ID, passport and visa)
The original NOC issued by the developer
Signed Contract F (MOU)
After the formalities are completed, a new title deed will be issued in your name, and you will officially become a property owner in Dubai.
The admin costs of buying property in Dubai comprise:
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
Agent’s fee of 2% of the property value
If you’re buying property on a mortgage, the legal steps will slightly vary. You need to get a pre-approval on a mortgage before signing the sale agreement. Approval on the mortgage from the DLD is also required before applying for the NOC.
Extra fees include the Bank Mortgage Arrangement fee, which is 1% of the loaned amount. Moreover, there is a Property Valuation fee between AED 2,500 to 3,500 + 5% VAT.
You can read our comprehensive list of FAQs on Mortgage to get your all questions answered.
The emirate’s law allows for non-resident foreign property ownership in Dubai, given certain conditions.
Both resident and non-resident foreigners can only buy properties in the designated freehold areas in Dubai. Some prominent freehold districts in Dubai include:
So, there you have it – four simple sequential legal steps to buy property in Dubai.
The process varies when you purchase a commercial property or buy off-plan properties in Dubai. Either way, real estate investment is a huge financial commitment, and it pays to weigh the pros and cons of buying property in Dubai before taking the plunge.
Like every other business, real estate transactions have their own set of rules and regulations that must be followed to ensure a seamless and legal purchase. When it comes to off-plan properties, there are certain additional steps that need to be taken in order to safeguard your investment. Therefore, the whole process requires a lot of deliberation and investigation.
Investing in off-plan property is followed by just one obvious selling statement: you are buying a property that does not exist yet. You need to have a certain level of trust for the developer as you will be investing your money in their project with an expected return on investment (ROI) only after the completion of the construction. In off-plan transactions, there is no third-party guarantee like in the case of ready properties, so an escrow account is set up by the developer to ensure the buyers that their money is protected and will only be released when the project is completed as per the agreed schedule.
Since the investor acquires the property either earlier or during the duration of the construction stage, so at times it is depicted as a dangerous way of investment option. Having said that, buying property in Dubai, especially the off-plan ones have always been fruitful and advantageous in the long term. Not only does it offer a great ROI, but it is also an inflation-proof investment.
In order to make a sound decision, you must do your homework and study various aspects of the off-plan market in Dubai before you choose to invest. This includes:
This article sheds light on all the legal steps that you should be aware of while planning to buy an off-plan property.
The developer and Dubai Land Department require the following documents for registration:
Passport and visa copy of the buyer
Emirates ID copy of the buyer
No Objection Certificate from employer (NOC)
mortgage contract (if applicable)
utility connection (electricity and water)
Once you have provided the developers with the required documents, they will give you a reservation form. This form is used to reserve the unit that you wish to purchase. It should include all the relevant details such as the project name, unit type, number of units, price, and payment plan.
Once you have finalized the developer, the next step is to read and understand the sales contract. Make sure that all the terms and conditions are clearly stated and you have a complete understanding of your rights and responsibilities. The contract should also include detailed information about the project such as the expected completion date, handover date, number of units, type of units, and payment plan.
After the contract is signed, the next step is to open an escrow account. This is a special bank account where your money will be transferred and held until the project is completed and handed over to you. The funds in this account are only released to the developer according to a pre-agreed schedule of milestones.
The next step is to transfer the funds to the escrow account. You can do this through a wire transfer or by using your credit card. Once the funds have been transferred, you will need to provide the developer with a copy of the receipt.
Once the construction is completed, you will need to apply for a mortgage. If you are taking out a loan to finance your purchase, you will need to provide the lender with all the necessary documents such as your passport, visa, and bank statements.
After the mortgage is approved, you will need to sign the final contract and pay the balance of the purchase price. Once the contract is signed, the title deed will be transferred to your name and you will become the owner of the property.
You will then need to obtain an occupancy certificate. This is a document that proves that the property is fit for human habitation and meets all the safety standards.
You will then need to register the property with the Dubai Land Department. This is a legal requirement and must be done within 60 days of the property being handed over to you.
Once the property is registered, you will need to obtain a utility connection. You can do this by contacting the relevant utility provider and providing them with your registration number.
Once you settled the mandatory fees, the final step is to schedule a pre-delivery inspection (PDI). This is an important step as it allows you to check the quality of the property and make sure that it has been built according to the specifications in the sales contract.
The PDI should be scheduled at least 7 days before the handover date. On the day of the handover, you will need to sign the handover certificate. This is a legal document that transfers ownership of the property from the developer to you.
Lastly, you will need to insure the property. This is to protect your investment in case of any unforeseen events such as fire, floods, or accidents.
Buying an off-plan property can be a great investment decision if you do your due diligence and choose the right developer. Follow the steps mentioned above to ensure a smooth and hassle-free experience. For any additional information you can contact Hermes Real Estate Anytime.