Foreigners’ Guide to Buying Property in Dubai

Buying a property in Dubai may sound like a complicated process filled with hurdles to overcome, especially for a first-time foreign buyer. However, it is actually not that complicated. The process of purchasing Dubai real estate is relatively simple compared to many other cities in the world.

Still, there are many things that you need to understand to minimize the risk associated with undertaking such a major monetary transaction. So, what are the things you must understand before buying a property in Dubai?

The first question is what are you going to use the property for? It can have a huge impact on the type and location of the property you are going to buy. Once you know your target, you need to study the property market to find out which area and type of property have the highest rental yield. 

The next essential step is learning the purchasing process. When you feel that you are ready to find your perfect property, get the help of a local property agent to guide you with the whole process.

Ask yourself why you want to buy property in Dubai

Before you actually jump into Dubai’s property market, ask yourself why you want to buy property in the city. Decide whether you want to purchase a property for investment purposes or to buy a property that you are planning to occupy yourself.

This will significantly impact the type of property as well as the area of the property you are going to buy. If you want to buy a property for investment purposes and to rent it out, decide your target tenants.

If you want to rent the property for tourists, make sure you buy one within close proximity to Dubai’s tourist hotspots. If your targeted tenants are expats, find a property that they will likely rent, such as close to business areas.

Once you know what your target is, study the local property market and the types of properties that offer the highest rental yield. While villas may seem like a better investment, especially if your target is tourists, an apartment with one or two bedrooms would actually be better since it has a higher rental yield. 

Understand the purchasing process 

If you are a foreigner, there are three main types of property that you are allowed to buy. It is important you understand each one to consider your options. The types are:

Freehold properties are the most common type with foreign buyers who are looking for an investment opportunity. With freehold properties, you have the right to buy, sell, and pass the property down as an inheritance. Keep in mind that freehold properties need to be bought from a developer that has been approved by the United Arab Emirates Government.

Commonhold properties usually include apartments, meaning fees such as maintenance and repair fees are required. As with freehold properties, ownership of commonhold property allows you to buy, sell, rent the property out, and pass it on as inheritance.

Usufruct properties are essentially long-term leases of a property. This lease usually lasts between 10 and 100 years, depending on whether you buy a residential or commercial property. As part of the lease, you have the right to do whatever you want with the property, except completely destroying it.

In Dubai, you can either purchase property ‘off-plan’ from a developer or ‘resale’ from a private seller. When you purchase a property ‘off-plan’, you, as a foreigner, will need to submit your passport as well as a reservation form outlining the terms and conditions of the deal.

Then, you will need to pay a reservation fee between 5% and 15% of the price to draw up the Sales and Purchase Agreement (SPA). The SPA is used to commit both parties to the deal. If you buy a property that is still under construction, make sure that the agreement includes the expected completion date and outlines any compensation if there is a delay in the completion by the expected time.

If you buy from a private seller, there will be a Memorandum of Understanding (MoU) that outlines the term and conditions of the deal. Once you agree on the MoU, you may need to put down a deposit, typically 10% of the property price. This deposit is used to confirm your purchase of the property.

When buying a property in Dubai (or any part of the world), having an experienced real estate agent or lawyer who will navigate the entire process with you is essential. Having a knowledgeable agent and lawyer who knows the ins and outs of Dubai’s real estate market will make the process a lot easier.

You can find a property agent or lawyer through friends or family if you know someone who has bought a property in Dubai before. You can also find an agent through property websites and contact the agent from there. Another common way is through online research.

Find the right property for you

There are a number of different factors you need to consider when you are searching for your ideal property. Of course, you will have your own particular interests, such as the style of the property and the amenities it includes. However, there are more in-depth considerations to make during your searching process.

Look at different locations – Choosing the right location is possibly one of the most important factors in buying a property, whether you are planning to live in the property or using it as an investment opportunity. For investors, choosing the right location is important to attract tenants.

Dubai is known for its congested traffic- which can be a big issue for many people. If you are looking to live in the city, it is highly advisable that you look for property near your workplace. 

Know the importance of due diligence

Before you decide to commit to a purchase, you will need to ask a lot of questions to determine the reputation of the developer as well as the real estate agent. If you are buying from a developer, look at the developer’s reputation, especially their quality and their ability to deliver on time.

There are many cases when the unit you purchase is not ready yet, so it becomes super important that you visit show homes to get an idea of what you can expect. If you are looking to buy a property from a real estate agent, make sure they are registered with the Dubai Land Department.

Check your liability on the property

Make sure that you will be able to receive a title that is free from any liabilities and/or debt. The seller has a responsibility to obtain a no-objection certificate (N.O.C) for the developer’s office. To ensure that the property is free from any liability, the developer will usually do various checks on the property before issuing the N.O.C.