According to
the latest figures, there are over 8.4 million expatriates in the UAE. Most of them live here for most of their
lives as the standard of living, life’s quality and income that is tax-free is
a major contributor.
Having said
that, buying an apartment or even renting one is
very expensive.
Many are
reluctant to buy because of uncertainty above the time period of stay in UAE,
down payments are very high, developers delay in handing over the possession
etc.
Renting is an
easy option because it is secure and easy to execute and terminate, but it’s
expensive. Renting an apartment accounts for almost 40% of the monthly income,
which negatively affects savings.
This article
will guide you about the advantages and disadvantages of buying a property in
the UAE.
SAVINGS
Buying is a
better option as there are many financial institutions providing mortgage
service on an easy term to their clients. These make installments on bank loan
even lower than monthly rent and safe from the hazard of yearly rental
increments.
ANYBODY CAN BUY
Freehold is
specifically assigned for anyone to buy whether you are a UAE national or
Overseas resident.
COSTS
Costs depend on
the sophistication of the area in which you are planning to buy the property.
Amenities and facilities also play a large role in factoring what the cost
could be. Prices start from 0.5M AED however, sales prices are exclusive of
fees charged by the banks, government departments and commission of brokers
PROCESS TO BUY A HOUSE IN
ABUDHABI
At first, a
Memorandum of Understanding is signed between the buyer and the seller along
which 2% fees are payable to real estate agents for their services and another
2% towards Abu Dhabi Municipality for transfer of property.
Upon paying
5,000 AED to the developer as an administrative fee, an ownership certificate
is issued to the buyer.
PROCESS TO BUY A HOUSE IN
DUBAI
Property
matters in Dubai are handled by Dubai Land Department (DLD). 2% of property
value is payable to real estate agents for their services. Transfer charges
levied by DLD are 4% (2% each to be paid by the seller and buyer).
A transfer deed
is issued against a price of 250 AED on the day of transfer. In order to
finalize the transaction and registration process, the registration fee of
2,000 AED is to be paid if the property is less than 500,000 AED. In all other
cases, the fees to be paid to DLD is 4,000 AED.
BANK CHARGES
After the
valuation of the property in question, a house loan is granted. Valuation fees,
which are 2,500 AED to 3,000 AED depending upon the property, is also charged
from the buyer. Range of profit on debt varies from 2.99% to 5% in the UAE.
LIFE INSURANCE
Financial
institutions demand life insurance when you apply for a house loan so that in
the event of death or any uncertain situation, the bank of a financial
institution is safe. Financial institution charges you a separate fee for life
insurance that varies from person to person depending on the health and age.
The fees or charges also depend on whether you opt for a life insurance service
from the bank or from an external party that provide the life insurance policy.
SERVICE CHARGE FOR
DEVELOPER
Upon approval
of mortgage and transfer of property in your name, a service fee is payable to
the developer on a pro rata basis
Service charges
stand for the payments that the property holder pays to the developer for the
maintenance and management of the property including electricity, cleanliness,
security etc.
These charges
usually depend on the area in which your property is located and is charged
using per square feet formulae and is directly paid to the developer
WHETHER A PERSON SHOULD BUY
A PROPERTY OR RENT IT?
Here we will
weigh all the pros and cons of buying or renting the property.
If we see at
all the charges, registration fees, initial payments, rental charges and
monthly increments in case of rental property as described above. We can safely
conclude that buying a property is a more feasible option when taken in the
long run. As in the case of mortgage taken from a financial institution, the
amount of monthly installment is lesser than monthly rental paid by the tenant.
This way you can become the owner of your own property and can subsequently
rent it out, sell it or live in it.
On the other
hand, the downside is that you will need to stay in the UAE until the whole
mortgage is paid off. Selling the property in between may not be easy or even
possible.
