Real estate purchase procedure in the UAE in 2021 | AX Capital

Real estate purchase procedure in the UAE in 2021

Anyone who plans to become a housing owner in the United Arab Emirates wants to know the nuances of buying real estate in this country. Does the real estate purchase procedure in the UAE in 2021 differ from the procedure that buyers had to go through earlier, for example, a few years ago?

We work to help investors, so we present to your attention a material in which we tell in detail about the stages of the purchase and sale transaction and the subtleties of buying an apartment in the UAE.

Is it possible to conduct a transaction remotely?

The purchase can be made remotely. To do this, you need to make a power of attorney for your representative, for example, for an employee of the real estate agency where you buy real estate.

It is necessary to certify the document with the seal and signature of a notary. After that, your representative will proceed to the transaction.

How to buy an apartment in the UAE for a Russian citizen?

Foreign buyers have the same rights to the acquired property as citizens of the Emirates. In addition, after buying property, a foreigner can make a resident visa and renew it every three years.

Since 2006, the owner, who is not a citizen of the UAE, can resell the property, rent it out, give it away, inherit or bequest, and so on.

If before the adoption of the law in 2006, foreigners could only rent housing for 99 years, now after passing all the stages of the purchase and sale transaction, the apartments pass into full ownership.

Currently, when purchasing a secondary housing, land department takes 2 percent of the villa or apartment cost from the buyer for the registration.

Some investors doubt whether to take a house under construction, wait for the house to be put into operation and then register it as a property or choose an apartment or villa that is already ready for today.

If you want to buy an apartment as profitable as possible and at the same time have the opportunity to wait for it for one or two years, it is better to buy an apartment in a building under construction, because they are cheaper than rented ones. There is no need to worry that the building will be a long-term construction project, because the state is responsible for the construction period, that is, for the delivery time of the house.

What the law says about the purchase of housing by foreign citizens

Citizens of the United Arab Emirates can take ownership of real estate anywhere in the country, but foreigners can only own housing in certain territories, in specially designated investment zones. As mentioned above, foreigners can donate or inherit the object, resell it, live in it independently, and so on. After the transaction is concluded, they do not become owners of the land where there is the building, even if a detached house is purchased. To get permission to register this land plot as a property, you need to write an application to the Executive Council of the locality where the house and land are located. Investment areas in Abu Dhabi include the following areas:
  • Al Reem Island,
  • Al Raha Beach,
  • Saadiyat Island,
  • Lulu Island and others.
In Dubai, these are the following neighborhoods:
  • Dubai Marina,
  • Palm Islands,
  •   Archipelago of the World,
  • Jumeirah Beach Residence
  • Greens, and so on.

Purchase procedure

Today, organizations that have a permit for this type of activity can sell land plots or apartments. Local authorities provide construction companies with a land and allow them to sell objects to foreigners on pre-approved construction projects. Before entering into a transaction, you should check whether the company has a license that gives them the right to sell objects.

When buying a secondary housing, you should ask to see the agreement with the previous seller. This document always contains information about him, as well as the primary cost of the premises.

Purchase stages

Buyers from Russia need to complete the following steps:
  • Signing the contract.
  • Transferring an advance payment to the seller (10% of the object’s value).
  • Signing of an agreement between the construction company and the buyer for the maintenance of the acquired premises.
  • Registering property, obtaining a certificate of ownership and keys.

Housing registration procedure in the UAE

In more detail, all the acquisition stages can be described as follows:
  • First, the parties sign a contract of a certain form, in the annex to which additional conditions are mentioned. It is necessary to use the services of an experienced lawyer, so that there will be no problems in the future, because without a specialist it is difficult to take into account all the nuances that need to be mentioned in the contract.
  • Next, the buyer gives the seller an advance payment, which is usually 10% of the purchase amount (may be more). A money certificate is kept by a third party, for example, an agent. If no one wants to break the contract and everything goes well, the investor gets his deposit back. If the buyer has changed his mind to buy the object, he cannot count on the return of the advance payment. If the seller changes his mind, he gives back the deposit in double amount (for example, not 10%, but 20% of the property value).
  • After making a deposit, the seller requests a document from the developer, which can be called a bypass list, because it states that the seller does not have a debt to the construction company that serves the house (if there is no debt for utility meters). All the transaction participants are present at issuing the certificate, and the buyer can immediately conclude a contract with the developer in his name for the maintenance of the apartments he is going to buy.
  • Then the object is registered. Both parties or their legal representatives must be present at the registration. The buyer and the seller pay the registration fee (4 percent of the purchase amount) and provide the employees of the agency registering the object with the necessary documents for verification.
  • The final stage is the receipt by the buyer of the certificate of ownership.

Property registration procedure in the UAE

The procedure for registering property in each emirate is different. For example, participants meet at the Land Department to transfer ownership in Dubai. Instead of the participants, their legal representatives can come to the meeting.

You must take the originals of such documents with you to the meeting:

  • No objection certificate from the construction company (provided by the seller);
  • Real estate purchase and sale agreement;
  • Passports, visas (or «Emirates ID») of parties (for individuals) or company documents, if a legal entity buys the object.

Participants sign documents for transferring the ownership. Then the buyer gives or transfers to the seller the amount of the object price. Further, the parties make all the necessary contributions and payments. After the owner receives a certificate of ownership (“title deed”).

Property tax for foreigners

The buyer and the seller pay:

  • Registration fee (shared by the seller and the new owner).
  • State fee for registration of the certificate of ownership (only the buyer).
  • Services of agents and lawyers (only the seller or both parties to the transaction, if this is specified in the contract).
  • Federal property sales tax (seller only).

Since 2013, the registration fee is 4% of the purchase price.

This fee for the purchase of apartments with the mortgage is equal to 0.25% of the loan amount and 290 dirhams.

In addition, the buyer must pay $70 for the registration of the document of ownership. A certificate is issued in the district court at the location of the object. If you want to get it, you have to make a request (issued within three days).

Agents are usually paid 2% of the property value in the Emirates. By the way, realtors must be at the conclusion of the transaction. If you buy a new villa or apartment, the seller pays the services of the agents. If you buy a house on a secondary market, in this case, both participants pay.

If you buy a villa or apartment with a mortgage, the financial institution will take from the borrower 1% of the loan amount to fulfill the contract.

The federal sales and rental tax is paid by the selling party, but only if the premises are commercial. You do not need to pay the tax when selling housing in the United Arab Emirates.

Mortgages and installments

Even foreigners can take villas and apartments on credit in the United Arab Emirates. Mortgage rates here are low (compared with interest rates in Russian banks) – 5.5-6% per annum, although the rates depend on the bank and the premises you are buying.

When signing a contract with the bank, the acquired property or the initial payment is your pledge.

Individuals who meet the following requirements can apply for a loan:

  • the borrower must have a foreign passport,
  • be of legal age,
  • have a regular income (the minimum level is set by financial institution).

If the applicant has a resident visa (residence permit) for a mortgage, the bank can pay up to 80% of the housing cost. If there is no residence permit, it can pay only up to 60%.

When applying for a mortgage, the buyer can first pay 20-40% of the apartment cost, and then sell the property within five to six months and make a profit of 15-25% of the cost of the villa or apartment. That is, the owner can increase the invested funds approximately twice every six months.

The applicant’s application for a mortgage is considered for several months. In rare cases, banks request additional documents and certificates.

Among other things, a foreigner can use the installment payment service provided by some construction companies. To attract new customers, developers make and offer profitable payment schemes (without interest, and you can take both ready-made and under construction apartments).

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