For those who want to buy a house in the United Arab Emirates, but do not have the full amount of money, local banks can help them and issue a house loan.
Real estate with a mortgage is available not only to indigenous residents of the country, but also to foreign citizens in the UAE in 2021.
How to get a house loan? What documents are required for this? How do you apply for a resident visa after buying an apartment? Especially for those who are concerned about all these issues, we have prepared this information.
Investors from other countries do not have to pay the seller the full price at a time to buy a house. A local financial institution can do this for the buyer.
Nowadays the mortgage lending market is becoming popular in the metropolis. So, buying and selling a house on credit have doubled since 2016. In 2019, people made more than half of all purchases (55%) with a mortgage. Not only local, but also foreign citizens can buy housing on credit.
Under what conditions can representatives of other countries apply for a loan? We will talk about this in the next chapter.
Financial institutions impose such requirements on foreign nationals:
The loan recipient is obliged to insure his own life. Insurance costs approximately 0.3% of the loan amount.
A person taking out a real estate loan must be at least 21 years old at the time of signing the contract with the bank.
The upper age limit is set by the banks, but most often people who are over 55 years old are denied a mortgage in financial institutions.
A real estate loan can be issued to foreign citizens at a rate of 6.5% to 9.5% per annum.
The term for which the loan is issued cannot be more than 25 or less than 5 years.
The loan amount cannot exceed 90% of the cost of the acquired housing.
A residence permit (resident visa) can be made based on the purchase of an object for at least $270,000. However, one of the main conditions for obtaining a residence permit is that the house must not be bought under the mortgage loan program.
If a foreigner received a resident visa by buying a property for 270,000 US dollars (or more), this does not mean that he has the right to find a job in the country and receive a salary without a special permit. Even the owner of an expensive house has to make a work visa.
Applicants for mortgage registration provide the package of documents to bank employees for its consideration. There must be:
A mortgage application form;
A photocopy of the passport;
A photocopy of the residence permit (a resident visa, there are several reasons to obtain it);
A bank statement for the last six months;
A character reference from the employer and a salary certificate, if the borrower is employed;
Company documents, the charter of the organization, certificates and the audit company conclusion on the financial ability of the legal entity, if the mortgage is taken by a businessman.
The bank makes its decision within 90 days. First of all, its representatives make sure that the applicant is solvent and creditworthy. If the decision is positive, the bank enters into a contract with the buyer. After that the investor can make a down payment equal to 10% (or more) from the amount of the mortgage loan.
Next, the purchase and sale transaction is registered with the Dubai Land Department. It is not necessary for the seller and the buyer to be present at the registration, because their legal representatives can come to the meeting for them. The power of attorney for the representative is issued in the notary office.
The buyer has to make some expenses when making a mortgage loan.
A down payment, which must be at least 10% of the loan.
Payment to the financial institution for a mortgage (at least 1% of the purchase amount).
Borrower’s life insurance (about 0.3% of the total amount).
A great deal of local banks does business in accordance with Shariah law, which prohibits to charge and pay interest.
However, local financial institutions have found a way out of the situation.
Firstly, there is a concept of Murabaḥah, according to which the client makes a down payment. As soon as the buyer chooses the object, he informs the financial institution about it. The bank buys the property and then sells the villa or apartment to the investor. He pays the total amount, except for a down payment, in installments without interest. When reselling an object to a borrower, the financial institution includes in its value the amount that it paid to the seller, the cost of inflation, as well as bank profits.
Secondly, there is ijara, when the investor finds an apartment, and the bank buys it and rents it to the client. The buyer becomes not the owner, but rather the tenant. The cost of living depends on the dynamics of price changes in the average market. The main advantage is that bank customer may not have the money to buy a property at all, but at the same time he gets the opportunity to live in the apartment as long as necessary. However, he needs to pay his rent regularly to do this. If he does so, no one can throw him out of the apartment. And ijara is different from the usual real estate rental.
Today, Dubai is in demand more than other UAE localities. We must say that Russian citizens are among the top five buyers of local apartments. Experienced investors make successful investments, because they have found a wide variety of benefits of investing money in properties in the local market.
The following advantages can be distinguished:
The architecture in Dubai, and in other cities of the UAE, is unusual and unique. Many local skyscrapers are built on artificial islands, where it is prestigious and comfortable to live. The houses located in other areas of the metropolis are in many ways also unlike the buildings in other parts of the Earth. You can admire them eternally.
In addition, indigenous people, emigrants and tourists find a lot of places to have fun in many emirates: from relaxing on the beach and swimming in the sea to skiing on artificial snow.
A huge number of travelers and immigrants from different parts of the world come here every year. So investing in real estate in the UAE today brings high income – 7-8% of the cost of apartments per year.
Prices for apartments and private houses in Moscow are almost as good as the prices for apartments in the UAE. At the same time, housing in Moscow and Dubai (with the same area and cost) has a serious difference from each other. If it can be sold with a turnkey finishing in Dubai, the apartment in Moscow is often in need of renovation. The cost can be reduced only with an urgent sale.
Many Russian investors have long realized that it is more profitable to buy an apartment or villa in the Emirates than in Moscow.
Usually, buying and selling a house with a foreign investor is carried out without any problems in the United Arab Emirates, but it is not so easy to issue a mortgage to non-residents.
It is easier to take a loan to buy a villa or apartment for people who have a permanent source of income in the United Arab Emirates. Although, some financial institutions issue a loan to foreign citizens secured by property.
You can make a deposit to the bank (a down payment) of at least half of the housing cost. And after that it is most likely that the mortgage will be approved to the foreigner.
The United Arab Emirates does not have most of the taxes that are accepted in many countries of the world. Local real estate is so popular among both indigenous people and foreigners. Among other things, the state economy has remained stable for many years, which also attracts buyers of local property.
Those who work or run their own business related to the country are more likely to buy real estate here. Apartments become a second home for them, and the opportunity to travel to Dubai and Abu Dhabi from many Russian cities is another factor in favor of buying a local villa or apartment. For example, it takes only five hours to get from Moscow to Dubai, as well as to Abu Dhabi.
Dubai’s artificial islands in are attracting more and more investors’ attention from different parts of the world. According to the developers who are building residential complexes and infrastructure facilities here, they may become more popular than Ibiza. There are a lot of hotels, nightclubs, cafés, restaurants and bars on the islands.
You need to pay at least $100,000 to become the owner of an apartment on an artificial island in Dubai. If this apartment is rented out, the income can grow annually, because artificial islands are considered prestigious and incredibly comfortable to live in. And the local apartments are in demand among emigrants and travelers.
Today, tourism is so developed in the UAE that it is the second destination after oil exports, at the expense of which the state lives. Therefore, investing in buying real estate in order to rent it to travelers is one of the most effective ways to earn money.
According to statistical studies, the number of tourists visiting this country every year is rapidly increasing. Experts believe that the peak traffic will be in 2021 (from October 1 of this year to March 31, 2022), when the world exhibition Expo-2021 will be held in the metropolis. The most experienced investors are already thinking about the profit that local homeowners will be able to make by renting out their apartments during this period. In short, investors are already buying houses today in order to earn income from renting them to tourists and businessmen during the Expo exhibition, as well as resell the property after the end of this event. It is planned that the exhibition will facilitate the relocation of representatives from different countries of the world, who will engage in business here. This will make the objects in the local market more popular and attractive.
An area near Sports City is being built up actively due to the preparation for Expo-2021. This is a freehold-territory. The increased attention of foreign real estate investors is focused on it today.
The main disadvantage of buying a house here is not the easiest procedure for a purchase and sale transaction, because a foreign investor has to go through a lot of institutions before he registers his apartment or house as a property. At the same time, it should be noted that the procedure is easier for representatives of Western Europe than for citizens of other countries of the world.
However, this does not bother buyers at all, because there are almost no risks for foreign investors here. But the same cannot be said for European countries. For example, due to the strict legislation of the United Arab Emirates, it is impossible to meet realtors who want to deceive the client. You cannot apply for a house or apartment and then find out that the property may have a different owner. There are no long-term construction projects, and it is almost impossible to sell the same apartment to one seller several times. Such cases often happen in Russia, when the seller receives money from several buyers, who cannot figure out which of them is the owner.
We can say that the United Arab Emirates is open to the whole world, because the indigenous people here are about 10%. The rest of population (90%) are immigrants, citizens of Russia, the United States of America, Canada, Australia, and European countries.
According to the Land Department of the country, some of the most active real estate buyers are Russians in the UAE.
Most of them choose houses in the freehold zones of Dubai, where citizens of many countries have the right to buy a cottage, apartment or land plot. At the same time, according to the law, which previously did not allow foreigners to become full owners of villas and apartments in such territories, today those who buy an object here can dispose of it by will, that is, sell, rent, issue gift agreements, inherit it, and so on.
However, the indigenous residents of the country can only buy land plots in Dubai. Foreigners are only allowed to rent these areas for a period of up to 99 years.
Downtown and other areas of Dubai.
Over time, the list of these districts increases significantly.
You can start your search for a villa or apartment in the UAE right now. The database of our agency contains excellent real estate rental offers in the megacities of the country. Our employees are happy to help you choose the best apartments among the many properties in these cities, and provide legal assistance in preparing the necessary documents. Buy or rent a house in the United Arab Emirates with our help, because it is profitable, safe and reliable!