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A Buyers’ Guide To The United Arab Emirates
Below is an overview of what to expect when buying property in the UAE, along with an idea of costs and the purchase procedure.
Foreign nationals are now allowed to buy freehold properties in designated areas of the UAE, while Gulf Cooperation Council (GCC) nationals are can purchase freehold property anywhere in the Emirates.
As the real estate market is still relatively new in the UAE, most property for sale is newly built and foreigners buy within special pre-approved zones. Residency visas are issued upon completion of sale for those buyers who wish to make a permanent move to the UAE.
A Sales Agreement is just about the only document required when you buy a property in the UAE; however, it is legally binding and is signed once all legal checks have been undertaken and negotiations have been finalised.
In order to secure a property, a holding deposit of anything from 1,000 to 3,000 GBP is normally paid. This deposit is non-refundable in the event that the buyer decides not to continue with the purchase.
In the next stage, the Purchase Contract, stipulating the payment schedule, is drawn up. Usual payment terms are between 10% and 20% to be paid every three months until completion and the build time is normally between 12 to 36 months. The introduction of the new escrow law in the UAE has been crucial to protecting the interests of property investors. Buyers can be completely sure that their funds are safe and secure because they are held by a third party bank. Off-plan property can be sold at any time during this period, but it will incur a transfer cost of approximately 2%.
The Sales Agreement and other required documents are then lodged at the Land Registry Department.
Government legislation has simplified the purchase procedure greatly throughout the UAE and a solicitor, although recommendable, is not always used, simply because property transfers and contract exchanges are mediated by the relevant property developer and the Land Department. Strict transfer procedures are adhered to by these parties.
A good solicitor will, however, be required to explain the effect of the clauses of UAE mortgage offer documents, as well as highlight any potentially hidden fees that may or may not be disclosed by the financial institution’s representative.
Expect to pay the following costs when purchasing real estate in the UAE:
2.4% stamp duty
1.5% land registry fee
1-8% transfer of off-plan contract cost
No income tax or capital gains tax is levied in the UAE on rental income or property sales.
Mortgages are now widely available from most banks and some financial institutions in the UAE, with HSBC interest rates currently at approximately 6%. Borrowers may choose between conventional mortgages and Islamic mortgages, 70% of which, interestingly enough, are granted to non-Muslims. A benefit of the Islamic mortgage is the fact that there is no charge for early repayment.
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