Buying Property in Dubai

In the past, foreign nationals have been reluctant to purchase property in the Middle East. Deterred by a history of violence and instability in the Arab World and discouraged by national laws in many countries that limit foreign ownership, expats looked elsewhere for second homes or real estate investments.

In 2002, however, Dubai’s crown prince stepped outside the box when he issued the Freehold Decree, formal legislation that allowed foreigners to buy property, sell property, or lease or rent property at their own discretion.

The decree was designed to increase international investment and put the Emirate on the map as a global hotspot.

With no special permission needed or hidden hoops to jump through, buying property in Dubai became easy and potentially profitable for foreigners. However, even today, the market in Dubai is still in its infancy, and thus there are some important points to consider when thinking about buying property in Dubai.

The purpose behind your purchase

Before you start perusing the market, it’s necessary to pinpoint your exact reason for purchasing property – either for investment or to live in. The purpose behind your purchase can greatly affect what type of property you should consider.

If investing, you will ultimately be renting the accommodation, thus it's necessary to do some research and find out what kind of property has the highest rental yield. For example, 1-bedroom flats have higher yields than large villas; thus even though the luxurious lure of owning a villa in Dubai is tempting, it is a better business decision to purchase the flat. 

Help with househunting?

It is best to purchase property in Dubai from a developer, or to enlist the services of a real estate agent. It is important to do background checks and confirm the reputation of both entities, though most operate with a high level of integrity.

If purchasing from a developer, chances are your new home may not even be built yet. Thus, expats interested in these endeavours should take care to visit presentation centres and show homes to get an idea of what to expect.

In most cases, whether dealing with a developer or a real estate agent, a fee of between 2% and 5% of the selling price is expected to be paid out in addition to the property price.

It is also advised to hire a lawyer to aid with the purchasing process, though this is not a formal requirement in Dubai.

The purchasing process

In order to purchase property in Dubai you must be over 21 years of age.

If you satisfy this requirement then once you decide on your dream home in Dubai, the first step in purchasing the property is making an oral offer to the seller. Once this is accepted, a formal sales contract is drafted and agreed upon between the parties; a deposit is made, the buyer obtains financing, the seller ensures that the property is not encumbered by anything that goes against what has been stipulated, final payment is made or a payment plan is solidified, and eventually the deed is transferred.

There are slightly different sets of protocol depending on whether you purchase property from a developer, called an “off-plan” purchase or whether you purchase property from a private seller, called a “resale” purchase.

It should be noted that often times, a seller will require that an expat has been “pre-approved for home financing” before signing the sales contract

Purchasing “off-plan” property in Dubai

When purchasing property direct for a developer – an “off-plan” purchase – expats will need to submit a completed reservation form with their passport. The reservation form typically summarizes the basic terms and conditions of the sales agreement, the details of the payment plan, and the buyer and seller’s personal details.

A reservation deposit, between 5% and 15%, or what has been otherwise stipulated, is then paid and the formal sales and purchase agreement is drafted.

 This document is largely similar to the reservation agreement, but it also commits both the buyer and seller to the deal. Some developers require that an expat pay up to 20% of the purchase price of the property before they draft this agreement, thus it is recommended that you agree when this document will be signed at an early stage.

If purchasing property that has yet to be completed from a developer, be sure the purchase agreement includes the completion date and the compensation awarded if the property is not completed by that time period. Furthermore, if the property is to be furnished, decide on an appropriate deadline for furnishing.
To complete the process of buying property in Dubai you must transfer the deeds. This is done at the developer’s office if the property has yet to be completed or at the Land Department offices in Deira if the property is already registered.

The buyer must obtain financing and pay 100% of the property price at this point.
It is then normal protocol that you can inspect the property and make a “snag list” of any issues you have that the developer must address.