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.
