What Investors Need to Know About Dubai

Dubai is one of the hottest areas on the planet for real estate investors. Even as the economic landscape has experienced some flux and uncertainty over recent years, investors continue to pour money into Dubai’s real estate. According to data from the Dubai Land Department (DLD), released by its Real Estate Research and Studies Department, total investment transactions for the first half of 2016 reached Dh57 billion from 26,000 investors made up of 149 different nationalities. Indian investors led the pack of foreign investments that made up that impressive number, with the British and Pakistanis, respectively, rounding out the top three.

A track record like that generates a lot of buzz and leads to many potential investors seeking out all of the information they can find on investing in Dubai. So, here’s an overview to help you get started.

Dubai Real Estate Taxes, Laws & Fees

Investors, both local and foreign, are wise to examine the real estate taxes, laws, and fees of any area in which they are considering an investment. This is frequently one of the first items of consideration. In Dubai, these items largely favor investors and cause little hesitation. Below are some of the Dubai-specific items to consider.

• Capital gains tax on sold property is not enforced, nor is income from property currently taxed by the Dubai Government, leading to greater returns. Keep in mind though that personal liability in your home country falls under a different jurisdiction, so it’s wise to consult a local tax expert.
• International property investments in Dubai are deliberately straightforward, with no hidden legal formalities, thanks to The Freehold Decree passed in 2002. This gave foreigners the formal, legal right to buy, sell and lease property in Dubai at their discretion.
• A Land Registry Fee, introduced recently to avoid a further real estate bubble in Dubai by stabilizing the market, is currently an obligation of purchase. The fee is currently 4%, with half (2% currently) paid by the buyer, the other half by the seller.
• A maintenance fee is common for many properties to cover upkeep of the building and any shared facilities. Since this fee can vary considerably from one property to another, investors need to make sure they know the exact costs before committing to a purchase.
• Property laws allow foreigners to own real estate in only certain designated areas of the city however, these areas in actuality exclude only a very small total of the city. Investors should always consult The Real Estate Regulatory Authority (RERA) or a lawyer before becoming too heavily vested in property to make sure that the property is actually available to them.

Where and What to Buy in Dubai

Obviously the biggest consideration for any real estate investor is the property itself. Careful property vetting involves a process of deciding where to buy in Dubai and what type of property to invest in. Both of these items will heavily impact the return of the investment.

Consulting a real estate agent is one good option for investors. These professionals assist by making investors aware of new properties as soon as they come on the marketand may keep you from missing out on other potential property investments that could be overlooked when conducting a search alone. Another option is to turn toward real estate crowdfunding platforms, such as Durise, to find properties to invest in that have already been heavily vetted and examined for risk/reward. This platform is also useful if you are interested in buying in a new development off plan. Another option with new developments is to undertake the legwork on your own and research online before approaching the developers directly.

Dubai is a bustling city with many beautiful and popular areas. Although you truly can’t go wrong with virtually any area in the city, investors will do well to pay attention to properties that are centrally located, overflowing with amenities, and that boast good facilities.

Among the top areas for real estate investments in Dubai are the following five locales:

1. Dubai Sports City
2. Dubai Silicon Oasis
3. Jumeirah Village Circle
4. Meydan
5. Dubai World Central

Buying Off Plan in Dubai

Off plan property refers to property upon which a structure has not yet been constructed. These properties are also commonly known as “pre-construction” in certain areas of the world. The Real Estate Regulatory Authority (RERA) recently introduced a set of regulations to ensure developers meet all commitments to projects and buyers. This has made buying off-plan in Dubai a very safe proposition for investors. RERA off-plan requirements include:

• developers must pay in full for the land as well as make a down payment of 20% as a bank guarantee, or they must deposit 20% in an escrow account, or complete 20% of the development.
• developers must guarantee their project will be completed on time. To insure this, they must put a 10% performance guarantee in place. Investor should always review the sales agreement before signing to formalize the compensation they are entitled to in case the development in which their investment property is located is not completed on time.

Additionally, off-plan purchases require a deposit, which ranges from 5 to 15%.

Dubai’s Property Purchase Procedure

Making an oral purchase offer to the vendor or developer is the first step of any Dubai property purchase. This casual communication allows the investor and seller to come to an agreement on all of the purchase’s main details before they move on to formalize the investment purchase.

For off-plan purchases, investors need to sign a reservation agreement and arrange a reservation deposit. After this, the sales agreement is drawn up. When purchasing an existing property, this is the stage when the investor needs to provide a 10% deposit check to the seller, as well as any agency fees that might be due.

A formal sales agreement, signed by both parties, is an important piece of any property purchase.The sales agreement should list the sale’s specific terms and conditions and details of the payment plan. When a mortgage loan is needed for an existing property investment, the bank may carry out a valuation completed by an external chartered surveyor before lending funds on the property. The final step of the property purchase phase is the transference of deeds. This is completed either at the developer’s office or at the DLD offices in Deira. Buyer and seller, along with any necessary bank representatives, complete the final paperwork and financial obligations, including payment of the Land Registry Fee, before ownership is then officially transferred.

Real Estate Crowdfunding Benefits

As crowdfunding continues to become a standardized process, real estate crowdfunding has emerged as an alternative to both processes for off-plan and existing property purchases. Investing in property through a real estate crowdfunding platform, such as Dubai-based Durise, is a fantastic alternative for both traditional investors and newbie investors looking to get into the game with minimal research/vetting work and a minimal investment amount.