Dubai’s property market has witnessed exponential growth since the pandemic, attracting many foreign investors and first-time buyers looking to capitalise on the expanding market. The real estate and construction sector now contributes nearly 14% to Dubai’s GDP, with many people choosing to relocate or expand their investment portfolio by buying properties.
How to Buy Property in Dubai
For first-time buyers, understanding the legal nuances and regulations of buying property in Dubai is essential for a smooth transaction. This guide outlines the complete procedure for buying property in Dubai from start to finish.
What to Know?
Before you decide to buy a property in Dubai it is important to know there are two primary types of ownership: freehold and leasehold.
Freehold Ownership
Full Ownership Rights : Freehold ownership grants the buyer complete ownership of the property and the land on which it is built. The owner has the right to use, lease, or sell the property without any restrictions.
Long-term Investment : Freehold properties are often considered long-term investments as they provide greater flexibility and potential for capital appreciation. Owners can make modifications, and renovations, and pass the property on to heirs.
Areas : Freehold properties are available in most areas in Dubai, such as Downtown Dubai, Dubai Marina, Palm Jumeirah, and Emirates Hills.
Leasehold Ownership
Limited Ownership Period : Leasehold ownership allows the buyer to own the property for a specific period, usually up to 99 years. After the lease period expires, the property rights revert to the landowner unless the lease is renewed.
Usage Rights : During the lease period, the leaseholder has the right to use the property, make internal changes, and lease it to others. However, major structural changes usually require the landowner's permission.
Considerations for Expiry : Buyers must consider the terms of the lease, including what happens when the lease period ends and whether renewal is possible.
Buying Property in Dubai
Buying property in Dubai involves a series of structured legal steps and a clear process that is quite straightforward
Preparations
Begin your property search in line with your requirements, such as property type, size, location, and proximity to amenities like schools and hospitals. Engaging a reputable real estate agent can simplify the process by assisting in finding suitable properties, negotiating prices, and guiding you through legal and administrative procedures.
Legal Steps to Buying a Property in Dubai
1. Formulating a Contract Between the Buyer and the Seller
Once you identify a property, engage your real estate broker to negotiate the terms of sale with the seller. This includes discussing the selling price, mode of payment (cash or mortgage), and other essential factors. Entrusting this stage to a professional broker helps avoid disputes and ensures all terms are unambiguous, providing a seamless transaction process.
2. Signing Sale Agreement (Memorandum of Understanding)
The sale agreement, known as the Memorandum of Understanding (MOU) or Form F, outlines the terms and conditions, including the purchase price. Both buyer and seller must sign the MOU before a witness, typically the real estate agent, at the Registration Trustee’s office. The buyer pays a 10% security deposit to the Registration Trustee, which is refundable once the property transfer is finalised.
3. Application for a No Objection Certificate (NOC)
The buyer, seller, and agent meet at the developer’s office to apply for the NOC. This certificate confirms no outstanding service charges or obligations on the property. The seller will pay the required fees for the NOC and then the developer issues the certificate, clearing the way for ownership transfer.
4. Effecting the Ownership Transfer with the Dubai Land Department (DLD)
Visit the Dubai Land Department with the necessary documents to transfer ownership. Required Documents: - A manager’s cheque for the property price payable to the seller - Original identification documents (Emirates ID, passport) for both buyer and seller - Original NOC from the developer - Signed MOU (Form F)
Here the buyer will pay the transfer and registration fees required by DLD. Upon completion, the DLD will issue a new title deed in the buyer’s name, serving as legal proof of ownership.
Costs Involved
Dubai Land Department Fees – 4% of the property value + AED 430 if purchasing land 4% of the property value + AED 40 if purchasing an off-plan property 4% of the property value + AED 580 if purchasing a ready property Property Registration Fees – AED 4000 + 5% VAT Title Deed Fees – AED 250 Agency Fees – 2% of Property Value
The Four Types of Transactions
There are typically four main types of transactions when buying properties in Dubai, each with its own set of procedures and requirements. These transactions can range from straightforward cash deals to more complex scenarios involving mortgages and it is imperative to understand these, to avoid any roadblocks in the sales process.
1. Cash Buyer and Cash Seller (Manager’s Cheques)
This scenario is the most simple where the seller has no existing mortgage on the property and the buyer doesn’t require a mortgage to complete the transaction either.
- Seller signs Contract A: Agreement between seller and agent. - Buyer signs Contract B: Agreement between buyer and agent. - Unified Contract F (MOU): This is created between buyer and seller. - Power of Attorney (POV): Needed if either party is not in the country. - NOC from Developer: Seller must apply for a No Objection Certificate. - Booking Deposit: Buyer submits a 10% booking deposit. - Security Cheque: Seller issues a cheque against the 10% booking deposit. - Transfer at Trustee Office: Once the NOC is issued, both parties go to the Trustee Office for transfer
2. Mortgage Buyer and Cash Seller
The legal steps will vary slightly if you’re buying a property with a mortgage. It is advisable to get pre-approval before you start looking for a property to buy. The Same procedure as with a Cash-to-Cash sale applies in this case, along with the following:
- Pre-approval: Buyer must have pre-approval from the bank (valid for 30-90 days). - Down Payment and DLD Fees: Buyer must have a 20% down payment and 4% DLD fees ready. - Unified Contract F (MOU): Once signed and the seller gets the NOC from the Developer, Contract F is sent to the bank. - Property Evaluation: The Bank conducts a property evaluation, which the buyer pays for. This cost varies from AED 2,500 to AED 3,500 +5% VAT. - Manager’s Cheques: The Bank issues a cheque to the seller for 80% of the property value. The buyer issues a cheque to the seller for the remaining 20%. - DLD and Mortgage Registration: Buyer pays a 4% DLD fee. The mortgage is registered with the DLD at the buyer’s expense. - Title Deed: The bank retains the original Title Deed throughout the loan duration.
3. Cash Buyer and Mortgage Seller
There are additional complexities when buying a mortgaged property, including obtaining a liability letter from the seller's bank, settling the existing mortgage, and ensuring that all necessary documents are transferred between financial institutions and the developer. Once Form A and Form B have been signed the next steps are:
- Unified Contract F (MOU): Issued once agreed. - Settle Mortgage: Seller settles the mortgage on the property and requests a liability letter from the bank. - Liability Letter: Valid for 15 days and necessary to obtain NOC from the Developer. - Blocking Property: Before clearing the mortgage, all parties go to the Trustee Office to block the property under the buyer’s name. - Cheques Issued: The buyer issues a cheque to the seller’s bank to settle the mortgage and another cheque to the seller for the remaining balance. - DLD Fees: Buyer pays a 4% DLD fee. - Clearance Letter and Title Deed: The bank issues a clearance letter and the original title deed to the seller. - Property Transfer: The property is then transferred to the buyer’s name.
4. Mortgage Buyer and Mortgage Seller
This is the most complex out of the four types of transactions and involves a detailed coordination between both banks, the buyer, and the seller to ensure that the existing mortgage is settled and the new mortgage is properly established.
- Unified Contract F (MOU): Buyer and Seller sign. - Booking Deposit: Buyer submits this deposit. - Property Valuation: The buyer’s bank conducts a valuation and makes a final offer. - Liability Letter: Seller applies for this from their bank, then sends it to the buyer’s bank. - Settle Existing Mortgage: Once settled, the original Title Deed held by the seller's bank is released to the buyer's bank. - NOC from Developer: Seller requests this and submits it to the buyer’s bank. - Bank Issuance of Cheque: After receiving the NOC. - Transfer Formalities: All parties go to the Trustee Office to complete the remaining formalities.
Dubai offers an exciting opportunity for those looking to invest in a dynamic property market, benefit from luxurious living standards, and capitalise on the city's strategic position as a global business and tourism hub. By following these steps, you can effectively manage the process of buying property in Dubai, ensuring a smooth and successful investment journey in one of the world's fastest-growing real estate markets.
