UAE – The Country That Offers International Buyers Unparalleled Access to Real Estate Investment If you’re looking into buying a home in UAE, you’ll discover an entire system of law designed to encourage international investors and maintain a stable marketplace. With clearly designated freehold zones, and simplified processes to register your ownership of the property, this process is less complicated for first-time international buyers than you would think.
Understanding how ownership works is the first step. In UAE, international investors have the opportunity to purchase their dream home in designated freehold zones. Freehold areas allow you to acquire ownership of both the unit, as well as the land upon which it sits, giving you the ability to rent, sell or gift your property to family members without restrictions based on time.
Freehold vs Leasehold: What International Buyers Need to Know
International investors primarily invest in freehold communities, and the primary reason is because the freehold owner has ownership rights to the property forever. This is particularly appealing to those looking for long term capital appreciation or rental income. On the other hand, leasehold agreements typically provide the right to use the property for a specified amount of time (usually up to 99 years). Although leasehold could potentially work for certain emirates, serious international investors prefer to buy freehold property in UAE for better resale opportunities.
While Dubai is probably the most well known marketplace for foreign ownership, with numerous communities such as Downtown Dubai, Dubai Marina and Palm Jumeirah, Abu Dhabi also allows foreign ownership in designated investment zones. In addition, Sharjah has been opening various projects to foreign investors; however, each emirate has its own regulatory body and therefore, it is crucial to confirm whether you can purchase in the area prior to making your decision.
Legal Process for Buying Property in UAE
The entire process of buying a property in UAE is very structured and is formally documented. First, once you decide on a property in UAE, you’ll enter into a Memorandum of Agreement with the vendor and put down a deposit, which is usually 10% of the cost of the property. Once you’ve completed all of the necessary due diligence and arranged for payment, both parties register the transfer of the property at the respective local government land registry. For example, in Dubai, this occurs at the Dubai Land Registry.
Typically, registration costs represent approximately 4% of the total value of the property in Dubai, plus a variety of administrative expenses. In addition, buyers should factor in agent commissions, which are usually about 2%. Finally, if you obtain a mortgage through a UAE bank, you’ll have to pay a fee to register the mortgage against the title deed of the property.
Many international buyers conduct the entire transaction remotely through a Power of Attorney, allowing them to acquire property in UAE without having to be physically located in the country. Nevertheless, visiting the country prior to completing the acquisition of a property is recommended.
Financing Options for Foreign Investors
A number of UAE banks will lend to non-resident foreign investors, but interest rates and credit terms tend to be tighter than for resident foreign investors. Typically, foreign investors are expected to provide a significantly larger down payment than resident foreign investors, i.e., 20-25%, and even more for non-residents. Obviously, interest rates available to borrowers will depend on the lender and borrower’s characteristics.
In many cases, cash payments are used for acquisitions made by international buyers, largely due to the desire to avoid paying additional closing costs and/or obtaining a loan. Off-plan development projects often include staged payment structures, where the buyer pays portions of the total price in advance of receiving the keys to the property, and/or at least until completion. Such payment plans enable buyers to reduce their up-front equity commitment, and still benefit from the potential increase in value of the property during construction and post-construction phases.
Why Investors Choose Property in UAE
While much of the allure of the United Arab Emirates (UAE) is based upon the ability of international investors to purchase and own property outright, there are other reasons why the UAE has become increasingly attractive to international real estate investors. The UAE is a country that has no annual property taxes or capital gains taxes on the sale of real estate; and it also boasts very strong rental demand in its largest cities, including Dubai.
Dubai itself, has become attractive to entrepreneurs, remote workers and high-net-worth individuals alike. For example, an international investor purchasing a one-bedroom apartment in Dubai Marina, will be able to earn a relatively high rental yield, when compared to most major cities globally. Luxury apartments in Palm Jumeirah are bought by many with the goal of preserving the value of their wealth and appreciating the value of their investment over the long-term, versus generating rental income in the short-term.
Sharjah offers a different value proposition. Prices per square meter in Sharjah are generally lower than prices per square meter in Dubai, which provides a more affordable entry point for investors who target end-users seeking affordability. In fact, investors targeting end-users in Sharjah and other developing communities are increasingly focusing on emerging communities.
Risks and Due Diligence
No marketplace is completely risk-free. Investors should review the reputation of the developer, the feasibility of the timeline for delivery of the project, service charges, and long-term infrastructure plans. Historically, reviewing sales data, and rental performance data of the specific community you’re interested in can help you avoid making expensive errors.
Additionally, it is wise to evaluate liquidity. Some communities have high volumes of transactions, which can create greater liquidity for sellers. Other communities may be more difficult to liquidate, especially during slower market conditions. Taking a disciplined approach to managing your capital can strengthen your long-term plan.
Professional Guidance from Keyspace Realty and Keyspace Dubai
Browsing online listings for a new home in UAE is just the beginning of the process. Keyspace Realty and Keyspace Dubai provide international investors with data-driven insights and structured advisory services to assist them with selecting a property, negotiating the purchase and managing the transaction. While Keyspace Realty and Keyspace Dubai offer international investors historical sales data, rental performance and demand analysis for the specific community so they can have all of their questions answered prior to making an informed decision as to whether or not to invest in the UAE, they will assist with the selection, negotiation and management of the transaction so international investors know what they want when entering the UAE real estate market.
Long-Term Strategy and Residency Benefits
Ownership of a home in UAE can also contribute to the planning of residency. The Golden Visa is an option to consider as a means to be able to obtain a renewable residency visa based upon the amount of money that the investor has invested. The majority of those who apply for the UAE’s Golden Visa are motivated in part by the minimum amount they will have to invest into purchasing real estate. As such, even if the government changes regulations regarding the Golden Visa, the connection between investing in property and obtaining residency continues to be an important reason why many choose to pursue the Golden Visa.
Investors with a five-to-ten year perspective on the UAE real estate marketplace are likely to achieve better results than those taking a speculative approach. The rental income and value of a property in UAE will increase rapidly and continuously (i.e., exponentially) over time to those that own a piece of real estate in UAE, while speculation is an element that will contribute to higher volatility in pricing.
The UAE real estate marketplace continues to develop, providing a transparent and welcoming marketplace for international buyers. International buyers who wish to purchase property in UAE and set up a solid base for long-term growth can do so with confidence when they have a good understanding of all applicable laws related to the acquisition and ownership of property; carefully assess the freehold community(s); and utilize the knowledge and expertise of experienced professionals.
Frequently Asked Questions
Can Foreigners Purchase Property in UAE?
Yes. Foreign investors are able to purchase property in UAE in designated freehold areas. Ownership rights in UAE are perpetual and transferable.
Must I Live in UAE To Purchase Property?
No. The buyer can purchase from an international buyer using licensed representatives; however, a physical presence within UAE could assist the purchaser during the selection process.
Are there any annual property taxes in UAE?
Yes, No. However, as per current laws in UAE, there are no annual property taxes nor any Capital Gains Taxes for all real estate sales in the UAE. Although, service charges are available to pay for any property maintenance.
What Percentage Deposit Is Required?
When entering into the Memorandum of Agreement, a 10% deposit is typical. In addition, mortgage buyers must meet the minimum down payment requirements of the lending bank.
Is Purchasing Property in UAE A Good Investment?
Yes. It can be, contingent on the choice of location, timing, and strategy. Global investors continue to be attracted by strong rental demand, the favorable tax treatment of UAE real estate and the rapid expansion of its population. The proper research and risk analysis of any investment will aid in achieving a higher probability of successful investments.
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