Buying a home in the UAE before and after completion of construction: expert opinion

Buying a home in the UAE before and after completion of construction: expert opinion

09.01.2022 (updated 01.26.2023)

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  • Buying a home in the UAE before and after completion of construction: expert opinion

Buying a house in another country is very often a daunting task. When looking for an overseas property, you may encounter problems and unexpected moments you have never experienced before. Only a professional understands all the pitfalls of the bureaucratic procedures. They will also consider possible legislation issues, guide you through the best payment plans and help you choose the best one.

In this post, we will tell you what property options are available for sale in the United Arab Emirates, what pros and cons of different types of installments are, and why it is worth looking for a property offer from a developer. The team of the AX CAPITAL real estate agency in Dubai helped us to prepare this post: senior consultant Aram Grigoryan and sales manager Dmitry Zolotko.


The process of buying property for foreigners in the UAE

Recent political and economic events have affected many areas of life of people from different corners of the world. The process of real estate purchase is not an exception. Despite the fact that the process of sending funds can now take longer, and its organization becomes more difficult, the money still reaches developers in the United Arab Emirates. In addition, some developers are mastering the various payment systems to give the opportunity of buying to any investor. 

Due to difficulties in the economic situation in the world, experts also recommend having at once the entire amount necessary for the purchase – this will allow you to purchase an object ready for occupancy.

Off-plan installment payments and buying new and second-hand properties

Installment payment options are available only when buying a home from a developer and, as a rule, the property is off-plan. There are a few specific options in the UAE housing market that offer already completed housing with the ability to arrange payments after moving in, but it will be difficult to find them on your own without professional brokers. As a rule, finished property in Dubai will have to be paid immediately and at full cost.

It is off-plan projects that offer the longest installment periods. The installment terms depend on the developer. Each company chooses the most favorable schedule and payment terms. Often the buyer must pay the full amount before the completion of the construction, but sometimes the last payments can be transferred after getting the keys. There are property deals with almost finished projects that the developer plans to hand over in a few months, while setting a payment schedule for a couple of years in advance. The down payment in this case can vary from 10% to 20%. The rest of the amount will need to be paid either before the completion of construction or after (depending on what is written in the contract). Realtors often recommend the second option, since it can be used to apply for a mortgage. In this case, the developer will be required to issue you a certificate confirming the commissioning of the property, and you will need to submit this certificate to the bank.

There are no installment options for purchasing pre-owned housing options. The buyer must pay the owner either the entire amount or half at once, and they can borrow the rest from the bank. The only stage where you can split the payment is when you make an advance payment, which is 10% of the property price, to book the unit you like.

The most profitable ways to purchase housing in the Emirates

Any project at the construction stage will cost less than after its commissioning. In addition, the base price of the average unit will increase every year. One of the reasons for the increase is the rising cost of building materials.

An option that experts also recommend is when you can pay part of the property cost after receiving the keys. In this case, after the transaction is closed, you will be able to rent out the property and cover the payment with rental income. For instance, in the case of an installment plan for three years after the completion of construction, you can save up to 20% -30% of the cost. The maximum installment period after the commissioning of the property is five years, but experts advise focusing on options up to three years, because otherwise the final price of the unit and, as a result, the volume of payments will increase proportionally.

Another option that the agency’s team advises is projects that were launched a year or a year and a half ago. Very often, there are no free primary apartments there, but recently many owners who could not fulfill their financial obligations to the developer have begun to resell the housing they bought. This type of property is worth considering because their construction will be completed shortly. Another reason is that the price is already much lower than the original one at the time of the official sales. Thus, you can pay part of the cost (for example, about 40%) directly to the owner, and the rest goes to the developer upon commissioning of the project. Similar options are now available in projects such as 15 Northside, Azizi Riviera, Shoba Waves, Stella Maris, Seven Palm, Port de La Mer or Madinat Jumeirah Living.

Mortgage with and without a residence permit

Non-residents of the United Arab Emirates will not be able to apply for a mortgage if the housing is under construction. According to experts, in practice, people living in the country also fail to get a loan under such conditions, although the reason to apply to a bank is legal.

Nevertheless, banks easily issue loans for finished units. The final amount for residence permit holders and those who do not have one will be different. The former may apply for payments up to 80% of the property cost, the latter for a loan of up to 50%-60%. To get a loan, you must meet a number of requirements: to prove that the house has already been handed over, and half of the cost of the property (in the case of non-residents) has already been paid.

Now real estate agencies have begun to actively work with banks, seeking to provide mortgages to their clients. Mortgage interest rates in the UAE are very favorable – about 3% -4% per year.

Installment plan from the developer: benefits and important aspects

If you purchase a property with an installment plan, the price will be fixed. Unlike a mortgage, this payment option does not include commission fees and any bureaucratic delays as this option is directly provided by the developer.

In addition to the fact that installment terms often allow you to start using the property before its cost is fully paid. You can even resell it. This process is called “assignment” and becomes available after covering a certain amount, depending on the contract with the developer. Sometimes it is only 20% to 40%. Such an option allows you to get profit on rising prices at different stages of construction. Real estate agents are always ready to help you find such profitable offers.

Experienced investors prefer installment options so that they can protect their money. The unstable exchange rates sometimes lead to the fact that the same property can both fall and rise in price when converting the money, for example, into euro. A more cautious approach allows you to diversify your investment and not to lose your savings if there are any considerable fluctuations in the financial market.

Tips for foreigners who want to get a residence in the UAE

To obtain a residence permit in the United Arab Emirates by investing in real estate, you have to purchase housing worth at least AED 750,000 (USD 204,000). In this case, the amount must certainly be fully paid, and the property must be handed over.

Experts recommend considering new properties from developers, since in this case it will be easier to pay the development company than an individual person when buying a pre-owned home. If the goal is to purchase buy-to-let property, experts advise choosing a studio apartment or a one- or two-bedroom unit, as large properties are less profitable and liquid in the UAE market.

AX CAPITAL team will guide you through the best real estate offers in Dubai, Abu Dhabi and other emirates and advise the most convenient payment option. To get more information and check out the largest property collection, please get in touch with our team.

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