How to avoid making a mistake when buying real estate in Dubai

How to avoid making a mistake when buying real estate in Dubai

07.19.2023 (updated 07.19.2023)

  • AX Blog
  • How to avoid making a mistake when buying real estate in Dubai

Buying real estate in Dubai may seem like a daunting task. It’s very common for novice investors to be afraid of making a mistake. How do I choose a profitable property? What should I pay attention to when buying? What questions should I ask the agent and what terms should I pay special attention to in the contract? These and other questions will be answered in our article.


Decide the purpose of the purchase

Professional brokers will point out that there’s very little one-size-fits-all real estate that will suit every purpose and goal. Are you looking for an option for relocation or investment? Are you planning to resell your home in a year and profit on the price difference or do you intend to rent it out in the future? In each case, the search criteria and the result will be different. A project under construction will be a great option for investment but certainly not for an immediate move-in. A villa in a community half an hour from the downtown area may be perfect for you but not for daily rentals. Serviced apartments with a prestigious hotel brand may prohibit short-term rentals and some developments don’t allow pets in the complex.

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Make a list of the relevant factors

Each case is different but there are a few general guidelines that can be emphasised.

  1. How much money are you ready to spend?
  2. Is a resident visa important to you? If yes, the minimum purchase price in Dubai is AED 750,000 (USD 204,000). You have to pay this money from your personal funds. In addition, if you use an instalment plan, you’ll also receive your visa once this amount is paid.
  3. What amenities and benefits are significant to you? Proximity to the centre or a particular neighbourhood? Availability of a school, park or beach nearby? Views of the water? Pet-friendly policy? Free parking space? Opportunity for daily rentals?

Explain all your requirements to your agent in detail. Let’s move on to the next point.

Choose an agent carefully

Yes, you can search for real estate on your own. However, when it comes to mistakes, this will certainly be one of them. Experienced brokers know the market from within. They’ll give you all the specifics that are impossible to find out even with a detailed search on the Internet. Information on the net is contradictory and not always correct, even from specialised resources. It’s easy to come across outdated or incomplete information. For example, this may relate to the validity of a resident visa in the UAE and the amount that you need to spend to obtain it, the size of the agent’s commission and other important issues that directly affect your interests.

Important things to keep in mind when choosing an agent:

  1. They must have a licence from the Real Estate Regulatory Agency (RERA). You can check this out on the official Dubai REST app. Neither registration nor a fee is required.
  2. The agent should know the city very well and be able to give you all the details about the community and neighbourhood that you are interested in — not only the general information obtained from brochures but also the specifics.
  3. Don’t approach the sales staff of a particular developer — they’ll only be interested in selling you their product. An independent broker will look for an option for you.
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Do research on the developer, the project and the neighbourhood

You don't have to be a Dubai connoisseur or live here to buy local real estate. The deal can be concluded remotely and the property can be selected from brochures, videos and photos. With a professional broker, this will be sufficient. However, the smart move is to ask the agent about the project, the developer and the neighbourhood where it’s located.

  1. It’s better to choose complexes from well-known developers with extensive portfolios and several completed projects.
  2. If it’s a complex under construction, research what amenities the developer has implemented before, how the brochures and reality correlate and what the price dynamics, level of demand and return on investment for these projects are. If the housing is ready, the same questions should be asked about the property that you’re interested in.
  3. When researching the area, pay attention to transport accessibility and status — under development or already developed with fully prepared infrastructure. The latter option is good for moving in right away, the former for investments.

Consider the additional costs

In addition to what you will pay for the purchase, some additional costs will be required. These include:

  1. Four per cent contribution to the Dubai Land Department (DLD) + administrative fee from AED 40 to 580 (USD 10 to 160). Sometimes developers offer discounts and cover half or the whole amount of the fee, but this should be clarified on a case-by-case basis. It should be understood that this is an exception rather than a rule. It’s also important to take into account that this fee is usually paid together with the down payment when applying for an instalment plan.
  2. Real estate registration fee: from AED 2,000 to 4,000 (from USD 550 to 1,100) + 5% VAT.
  3. Commission to the agency: 2% when buying on the secondary market. If you purchase real estate from a developer, you don’t pay a commission.

In general, the additional costs are about 4.5% when buying on the primary market and about 6.5% on the secondary market. For example, if you buy an apartment in the Damac Harbour Lights complex under construction for AED 1.4 million (USD 381,000), you’ll have to spend an additional AED 63,000 (USD 17,000). If you buy a small villa on the secondary market for AED 3 million (USD 817,000), the additional costs will be about AED 195,000 (USD 53,000).

We should also mention the mortgage costs, which can total up to 2.5% of the cost of

housing. If you choose a property under construction, it’s far more profitable to purchase in instalments from the developer.

If you buy real estate with cryptocurrency, it’s better to verify all the terms and find out if there’s any additional commission.

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Learn about construction deadlines, instalments and resale terms

This point applies to properties under construction. Several specifics need to be taken into account.

  1. In the UAE, there are no unfinished projects and the investors’ funds are protected by the state and kept in escrow accounts. However, the construction period may be slightly delayed. Developers are entitled to a grace period of one year, during which they can delay the delivery of the project. As a rule, leading developers do not allow such disruptions, but in general, this aspect should be taken into account when planning, especially if you intend on moving in.
  2. An instalment plan is usually tied to the construction phases. Make sure this is clearly stated in the contract. Review the terms and conditions carefully. Do not hesitate to check with the agent if some points are not completely clear to you. It’s his responsibility to explain the terms to you as thoroughly, clearly and carefully as possible.
  3. Different developers have different conditions for the resale of under-construction properties. If you don’t want to wait until the end of the development and plan to sell the asset in a year, clarify the minimum amount that you need to pay to the developer as part of the instalment plan. As a rule, it’s 30–40% of the cost of the housing.
  4. Discuss with your agent all the promotions and discount terms of the developer. For example, some units may be sold slightly cheaper as they don’t have a parking space or a balcony. If this is not important to you, you can take advantage of the discount, but if this aspect is relevant, it’s better to look for another option.

Examine the state of secondary real estate

If you decide to purchase a secondary property, find out:

  1. When the property was built;
  2. What condition it’s currently in;
  3. Whether the property has been renovated and whether it needs renovation.

As for the last two points, detailed photos and videos from the agent, as well as interactive video calls, will be helpful.

We will help you to choose and buy real estate in Dubai

Contact the AX CAPITAL real estate agency in Dubai to find the option that is right for you. Our specialists have a thorough knowledge of the market. They’ll give you a detailed consultation, help you to make a choice, outline an investment strategy and find the perfect home to live in. There are no impossible tasks for our brokers. Fill in the feedback form and we will prove it to you in real-time.

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