Interest in overseas property has seen significant growth in recent times, with the United Arab Emirates emerging as a leading destination for investors worldwide. In this article, you will discover how a foreigner can purchase an apartment in Dubai and the necessary steps to do so.
The Popularity of Dubai Property Has Reached an All-Time High
Dubai's real estate market experienced a surge in popularity following the EXPO-2020 world exhibition. As a result, the number of apartment transactions doubled. According to Golden Brown Group, the most sought-after areas for investors in Dubai include Jumeirah Beach Residence, Dubai Marina, Palm Jumeirah, and Madinat Jumeirah.
The highest demand is for apartments ranging from 80 to 100 sq.m, whether for investment purposes or personal residence. In 2022, this growth trend continued, with the number of real estate transactions in the United Arab Emirates increasing tenfold compared to 2021.
NF Group calculated that in 2022, approximately every fifth inquiry from Russian citizens for overseas property was focused on the UAE. Interestingly, 64% of potential buyers are considering purchasing a home abroad for the purpose of obtaining a residence permit or citizenship, while the remaining 36% plan to buy property for personal residence or investment purposes.
Photo: diana.grytsku (Freepik)
The United Arab Emirates offers quite favourable conditions for business and relocation.
The government maintains a favourable tax policy for investors and companies considering relocating to the country. Foreign citizens who invest in the UAE's economy can obtain an Emirates ID, a form of residence permit. Additionally, developers offer high-quality projects with interest-free instalment plans and high profitability.
How Can Foreigners Register Property in Dubai
Not only is it possible for foreigners to buy residential property in Dubai, but they are also warmly welcomed and strongly encouraged to do so by local authorities. However, this was not always the case. The government did not pass the law allowing foreigners to purchase apartments in Dubai and register them as their property (freehold) instead of just renting them (leasehold) until 2002. Now, both options coexist in Dubai, and this decision marked a turning point in the history of the UAE as an international investment hub.
You can invest in apartments in Dubai without residing there. As an investor, you have full rights to the property: a foreign citizen can sell it, rent it out, or give it as a gift. Residence in the country is not a requirement to buy property in Dubai; all you need is your travel passport.
You can purchase apartments either directly from the developer or through agencies. The entire process typically takes about a month, and you will need to cover several document-related fees, including:
- No Objection Certificate, NOC —500 to 5000 AED ($136 to $1360). You will need this developer’s permit to register the deal with the Land Department of Dubai,
- Transaction registration fee — 4% of the property value,
- Agency commission — usually about 2% of the property value.
Pros of Buying Property in Dubai for Foreigners
We've mentioned one of the undisputed benefits of buying property in Dubai—a document similar to a residence permit. But there's more to consider. Among other things, foreign investors are attracted by special tax conditions.
Currently, foreigners do not have to pay any taxes on purchased real estate or the income generated from renting it out. This means you can expect a stable and high profit if you choose to rent out your apartment or villa.
For instance, when purchasing apartments under professional property management in tourist areas, you can expect an average annual yield of 6.5%. This option is particularly appealing to foreign investors as the management company handles all the details, allowing you to enjoy the profits deposited directly into your account.
Additionally, there's potential for significant returns through property appreciation. For instance, villa prices in Dubai have surged by 16% within a year. If you invest in a new development, NF Group analysts suggest you could reap profits of up to 40% of your invested amount during the construction period.
Dubai can also serve as an investment in your seaside retirement. The emirate has introduced the "Retire in Dubai" program, allowing foreign citizens aged over 55 to obtain a five-year residency if they own a property in Dubai valued at over 2,000,000 AED (approximately $545,000).
Villa Six Senses Residences (Housearch)
Stay within the Boundaries
While foreign investors are warmly welcomed in Dubai and can purchase properties, there is one significant limitation to be aware of. Foreigners can only buy real estate within specific areas designated by the government. These areas are known as "freehold areas" and vary depending on the property type. In some of these areas, you can only buy apartments, while in others, you can only purchase villas. There are also areas where you have the option to buy both villas and apartments.
However, even with these limitations, there is no need for concern. These designated areas include some of the most popular and highly sought-after locations such as Dubai Marina, Palm Jumeirah, and Dubai Waterfront. In total, there are approximately 65 locations on the list, but it's important to note that the authorities can make changes to it.
Foreigners can also own property in other locations; however, it will not be considered freehold property but rather what is known as leasehold. This means that a foreigner can own a property for a maximum of 99 years or a shorter period based on the contract terms. It's important to note that leasehold contracts do not include ownership of the land on which the property is built. Typically, leasehold areas are situated in proximity to the city centre.
Foreigners Can Even Take Out Mortgages
If you don't have sufficient savings to purchase a property in Dubai, you can obtain a loan from a bank. The range of options may be limited if you are not a resident of the country, but once you acquire a residence permit, the selection of available options expands significantly.
Foreigners in Dubai can typically secure a mortgage approval for up to 75% of the property value if the property price is lower than 5,000,000 AED ($1,360,000). UAE citizens and residents, on the other hand, may be eligible for a slightly larger amount, around 80%. If the property price exceeds the specified amount, the mortgage limit is reduced to 65% for foreigners and 70% for residents. As you can see, in terms of mortgage limits, the difference between foreigners and residents is not significantly large.
Banks have various criteria for approving borrowers, with factors such as the borrower's country of permanent residence and verified monthly income playing significant roles. In some cases, you may be required to provide bank account statements and an employment contract as part of the application process.
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Buying from a private seller
- The seller and the buyer agree on the terms of the transaction verbally or in correspondence. This is not yet a legally binding document.
- The parties sign a document known as a Memorandum of Understanding. This document serves as the initial official step toward the transaction but does not constitute a purchase and sale contract. The Memorandum of Understanding outlines the terms and conditions agreed upon by the property owner and the buyer.
- Alongside the signing of the Memorandum of Understanding, the buyer is typically required to make an advance payment, which typically amounts to 10% of the property's value.
- The buyer can take out a mortgage if necessary.
- The parties sign the final document confirming the transfer of ownership; this is called the Transfer of Deed. At this stage, the buyer pays the full cost of the property.
- Once this is done, the Land Department issues a certificate of ownership to the investor.
Buying from a developer
- Once the investor selects the property, they complete a booking form that includes the terms of the deal, the buyer's personal information, the seller's name and banking details, and the payment terms. This document is similar to the Memorandum of Understanding and allows the buyer the option to change their mind and not proceed with the deal.
- The parties prepare a sale and purchase agreement. It is signed after the buyer has made a deposit, usually 5% to 20% of the total value. This agreement is a legally binding document.
- The buyer can take out a mortgage if necessary.
- The parties sign the transfer of deed in the developer’s office. At this stage, the buyer pays the full cost of the property.
- After that, the buyer can get a certificate of ownership from the Land Department.
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In a Nutshell
The UAE authorities provide foreign nationals with favourable conditions for purchasing property in the emirate. Be sure to evaluate your resources, complete the necessary paperwork, and thoroughly vet the developer. Afterward, you can pay off your mortgage and apply for residency.
Cover photo: diana.grytsku (Freepik)
