Property, Real Estate and Mortgages in Dubai
Real Estate and Property in Dubai
Buying a property in Dubai - where to start and questions to ask
- Decide if you're buying a property for investment or to live in. The two choices are not entirely mutually exclusive but it is important to know what your priorities are.
- If buying for investment, is it to rent or for capital gain. Again, the two are not entirely mutually exclusive but properties with a good rental yield (usually 1 bdrm apartments) may not see the same capital gains as a high-end villa (for which rental yields are quite often relatively low).
- Read the Sale & Purchase Agreement.
- When is the completion date and what compensation do you receive if delayed (most buildings are delayed by several months)?
- What is the payment schedule?
- Who is the designer, developer, builder and what history, reputation, quality do they have?
- If buying through a real estate agent, do some background checks. There are real estate agents in the UAE that are unreliable, and people have been ripped off. The same consideration holds for developers.
- Is it freehold or leasehold? If claim is that property is freehold, check the designated expat freehold areas in Dubai.
- Details of finishing - don't assume what you see in the marketing brochure is what you'll get, read the small print.
- What is the length of warranty on building?
- When is it furnished if sold as a furnished property (delays of a month or two are not unusual) and what furniture is included?
- Try and get a mortgage pre-arranged before going shopping, it puts you in a better postion for speedy resolution of a transaction. While demand is high, and supply is short, this can mean the difference between buying what you want or seeing it sold off to the next customer with cash in their pocket.
Property Developers and payments in Dubai - Caveat Emptor
Most property developers take payments directly from property buyers and use those funds to develop the buildings. With the large companies like Emaar, Dubai Holding and Nakheel it would be extremely unlikely that the developers do a runner with your money. However there is a potential risk with the smaller or newer developers that have set up recently to construct something in Dubai. For example in April 2006, the developer of the Light House in Dubai Marina disappeared with investors deposits. The Dubai Land Department is investigating setting up escrow accounts to hold deposits and payments to avoid this situation. In the meantime, do your due diligence. One indication is whether or not you can get bank finance for a project - banks are usually risk-averse, and even at the end of 2006 there are still banks that do not offer any mortgages.
Property and Real Estate for Dubai - information and resources
- gowealthy.com - a website with useful and easy to follow information on properties for sale in Dubai and the UAE.
- Gulf News - publishes several supplements every day (except Fridays) with property listings - rentals and sales.
- skyscrapercity.com - good discussion forum with building information and comments on almost every new development in Dubai.
- "The A to Z Guide of Freehold Properties in the UAE" - book published by Beyond Publishing and The Property Company in November 2006, available in bookshops (in the UK too apparently). A guide to property developments in the UAE with information on how to buy a property. No opinion from Dubai FAQs on usefulness (not seen yet).
UAE and Dubai Real Estate Agents
- See the Real Estate Agents in Dubai page for more information.
Mortgages and Home Financing from Banks in Dubai and the UAE
- UAE mortgage market is worth about 8 billion dhs in 2005 (or 4 billion according to Deutsche Bank in early 2007), expected to rise to 12 billion for 2006.
- Financing arrangements can be obtained from about 15 institutions in Dubai including Abu Dhabi Commercial Bank (ADCB), Amlak, Barclays, Dubai Islamic Bank (DIB), First Gulf Bank (FGB) HSBC, Lloyds TSB, National Bank of Abu Dhabi (NBAD) Standard Chartered, RAKBank (National Bank of Ras Al Khaimah), Tamweel (not Tameel or Tamwel), Union National Bank (UNB).
- UAE mortgage market is dominated by Amlak and Tamweel (both publicly listed companies dedicated to home finance) with 35% for Amlak and 25% for Tamweel, top three banks are Abu Dhabi Commercial Bank (ADCB), HSBC, RAK Bank. Amlak and Tamweel applied for a retail banking licence.
- Amlak came under fire (press article) in October 2006 for early redemption penalties being implemented unexpectedly. Their argument was that mortgage contract terms and conditions were subject to change (it was in the small print apparently).
- Emirates Bank International (EBI - also called Emirates International Bank), a large UAE bank, announced in April 2006 they were preparing a package of home loan products.
- ADCB, HSBC, RAK Bank and Tamweel seem to be the most popular and have fewer stories of disgruntled customers.
- Amount of mortgage finance is typically 60% to 90% of original purchase price with a few arrangements of 90 to 100% on selected developments appearing through 2006.
- Some banks will finance on a valuation (eg RAKBank) from Cluttons or Colliers (which costs you 3000 dhs and will be conservative by 5-15% from actual purchase price).
- Loan to debt ratio limit (highest proportion of income that can go towards mortgage repayments) is usually about 50-60% from most banks.
- Mortgage term is usually up to 15 years for expats or foreigners and 25 years for Emirati citizens (possibly GCC nationals). Loans are capital + repayment. Interest only loans are not available, at least during 2006. Some companies are starting to offer 25 year loans to expatriates eg Tamweel.
- Mortgage interest rates are typically about 2% above the US base rate (7%-8% during 2006 in Dubai). Sharia compliant financing Profit Rates may be slightly less.
- Long-term fixed rate mortgages are not available as of 2006.
- Paperwork for mortgages usually includes at least salary certificates or financial accounts showing evidence of regular income, passport and copies, bank account statements for 3-6 months.
- Salary transfer is not always required - it depends on the bank.
- Non-residents of the UAE can obtain mortgages but not easily and only from a limited number of institutions.
- Sharia compliant financing is available from several institutes including Amlak, DIB, Tamweel. It possible that non-Sharia compliant mortgages get rescheduled as Sharia compliant during the mortgage term - Amlak did this with their home financing in 2005 (this transition may affect monthly and total repayment amounts).
- Article 247 of the UAE Civil Procedures Law disallows banks in the UAE from legally foreclosing on a property owner who is residing in his propert. Apparently banks can get around this law by setting up a subsidiary company to offer property finance.
- Banks can now register mortgage agreements with the Dubai Land Department.
- Some banks have not entered into the mortgage market due to concerns that the property owner does not have clear title to the land, only the building.
31 March 2007 Mortgage finance update
- Amlak bank licence application rejected by the UAE Central Bank.
- ADCB offers up to 25 year mortgages to expats, no early repayment fee and will lend up to 90% of property value.
- HSBC no early repayment fee.
- Lloyds TSB no early repayment fee.
- NBAD offers up to 25 year mortgages to expats.
- UNB offers up to 20 year mortgages to expats.
- Abu Dhabi emirate only offers 99 year leases to expatriates. Dubai offers both 99 year leases and full ownership.
Property Law in Dubai
See the Dubai property law and legal issues page for information on:
- Divorce and Property in Dubai
- Freehold Law in Dubai
- Leasehold Law for Dubai Properties
- Inheritance Law in Dubai
- Sharia Law and Property in Dubai
Last update Tuesday 04-Mar-2014
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- www.skyscrapercity.com property forum for UAE properties - most, if not all, towers have a discussion topic.
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