The UAE is considered an ideal place for investment. There is no need to pay taxes on maintenance, rent, sale and inheritance – only registration fees, which are more often included in utilities. Let’s consider what expenses will be required for the purchase of real estate in Dubai.
Advantages of investing
Dubai is on the 5th place in the list of top cities in the world – both for living and for monetary investments. The following criteria are considered high here:
- security level;
- number of attractions;
- effective measures to combat the pandemic – a mass testing strategy and the launch of a nationwide vaccination campaign;
- the opportunity to become a resident. The main condition is that the investment amount should be at least $205,000;
- a profitable loan due to minimizing the financial burden. In 2020, the minimum down payment for nonresident citizens was reduced by 5%, and for local citizens – up to 15%.
Main expenses
The list of expenses can be expanded or narrowed, but it is standard:
- For Dubai Land Department (DLD) – 4%.
- The right of ownership, or, in another way, Title Deed – 500 dirhams.
- Purchase and sale insurance – 4200 dirhams.
- Agency payment – 2%.
- Registration of a Certificate confirming the absence of claims (NOC) – 5000 dirhams.
- Additional expenses: to the developer, local governments for maintenance and other.
Purchase and sale
In the Emirates, in comparison with Western countries, there are many taxes. In particular, on the income of individuals, on property. But residents pay indirect fees, the main of which is VAT. This is 5% of almost every product and economic transactions. The exception is monetary transactions in the real estate sector. Rent and trade of empty market facilities are also subject to payment.
Mortgage
Resident foreigners have the opportunity to obtain a loan from local financial institutions. The Dubai Land Department sets a fee for loan registration – 0.25% and an additional 290 dirhams.
Standard package of papers:
- identity card (passport) and a photocopy of a foreigner’s visa;
- photocopy of Emirates ID;
- proof of residence in the UAE;
- income/employment certificate;
- information about the invoice for the last 3-6 months;
- Memorandum (MoU);
- ownership rights;
- NOC.
A more accurate list is provided by each individual bank individually.
If you are not a resident, but you want to take out a loan, then prepare a photocopy of your passport, the papers from the bank are the same as for a resident. MoU, Title Deed and NOC are always required.
Payments at the construction stage
At the construction stage, the property is called off-plan. In this case, payments are tied to the stages of construction and are issued for 3-5 years in advance. Sometimes, the investor can’t keep paying. From here, there are four possible scenarios (at each case, the developer can terminate the contract and receive a refund of the remaining funds):
- 80% of the construction is completed – he will keep everything that the investor paid, and then put the property up for public auction. He also has the right to deduct more than 40%.
- Completed 60% – will deduct 40%.
- Completed less than 60% – will deduct 25%.
- In case of force majeure uncontrolled circumstances that prevent the completion of construction, it will deduct 30%.
Types of transactions
Money is Money
The option is considered to be a simple purchase and sale, in which the client draws up the papers, pays for the purchase. Here you will need to pay a 10% security deposit before you begin to draw up a Memorandum. When the certificate certifying the right to own housing is issued and the fee is paid, the Dubai Land Department will register the transfer of money and then issue the right to own the property. In turn, the investor pays 100%.
List of duties:
- 4% and according to the standard $136.
- 4000 AED for power of attorney registration and VAT, with a price tag of more than 500,000. Or 2000 AED and VAT, if the price tag is less than 500,000 AED.
- 2% to the broker\agent.
You need to provide the originals:
- Title Deed.
- No Objection Certificate.
- Passport, visa/Emirates ID (if available).
- MoU (Form F).
Money-Mortgage
It is suitable when the customer makes a purchase for which the seller has not yet paid the loan. The latter should apply to the place where he took the money, leave a request for a Letter of Responsibility (Liability Letter) with all the amounts. Its validity period is from a week to 15 days.
You will need to pay all the above fees, plus 2% for fixing the Letter.
The documentation is the same, plus the Liability Letter.
The transaction value consists of:
- the amount for repayment of the loan, if the owner does not cope with the payment;
- the initial price minus the funds that were paid for the seller;
- 10% of the security deposit – it will be returned at the end of the transaction.
The transaction is executed in the same way as described earlier.
Mortgage-Money
Credit firms provide mortgages up to 80%, having previously assessed the property (the assessment costs from 2500 to 3500 dirhams). The balance in the form of 20%, a 10% deposit and fees must be paid from personal funds.
The parties receive a certified No Objection Certificate, and the bank, in turn, sets the terms of the money transfer on the payment checks.
To the above contributions, the payment for DLD is added – 0.25% and 290 dirhams, to the documentation – everything that was received and presented when taking the loan.
The transaction will cost at least 20%. A certificate of ownership will be issued in the name of the buyer. At the same time, it will remain with the institution until the loan is repaid.
Mortgage-Mortgage
Take part:
- seller;
- investor;
- 2 financial and credit institutions;
- 2 mortgages;
- 3 parties – lawyers, agents, DLD, RERA.
The main difficulty is that most of the papers (the list is the same as it was indicated earlier) have set expiration dates. If this is not taken into account, they will lose legitimacy.
Process algorithm:
- Conclusion of an agreement between the parties.
- Conducting a cost assessment and signing the FOL by the buyer’s financial institution.
- Receipt of a Letter by the seller from his bank and sending it to the client’s bank.
- Negotiations on the loan amount.
- Registration of No Objection Certificate from the developer.
- Transfer of funds from the client’s monetary organization to the seller’s organization.
- The seller pays 1290 AED and voluntarily renounces the property.
- Signing of the transfer document.
- Providing checks to a financial institution.
- Decoration Title Deed per client.
Other costs
For real estate ownership
- Public services – 10% of the bill. For example, street lighting, waste collection.
- For an apartment: every month 128 per square meter, for a private house – 33 AED. For an apartment of 75 sq.meters – every year a contribution of 9600 AED.
- Utilities – are calculated by meters, area, number of registered people, duration of ownership of the house. On average monthly – $ 100-200 plus $ 220 for Internet, telephone, TV.
Voluntary payments:
- Home insurance – minimum 400 AED each year.
- Centralized cooling system – just above $100 in summer, $50 in winter.
For rent
In Dubai, the rental tax is 5% per year. Only foreigners should pay it. All utility costs, as well as deposits in the Emirates are paid by tenants.
When selling
When selling an object at the construction stage/after commissioning, a certificate of no objection will be required. It costs 5000 AED, and if ready-made housing is for sale, then 500 AED.
If the Title Deed is legally terminated, you will have to pay 4%. At the same time, if the immovable object is sold, then stamp duty will not be charged.
What to consider when calculating the minimum income for buying a home
It is better to take out a loan for a longer period, as this solution will expand credit opportunities. The interest will increase, but the amount of payments each month will be less. If the loan is repaid earlier than the specified date, you can always make additional payments – 10% of the principal debt in order to avoid penalties.
For this year, the fixed rate is 3.5%. More often, the amount of monthly contributions (EMI) is no more than 25% of monthly income.
Also, do not forget about the preliminary costs:
- DLD-fee – 4%;
- administrative fee – $157.9 for office premises and apartments, $117 – for land plots, as well as $10.89 – for off-plan objects;
- registration fee – if the price of the purchased one is below $ 136,200, then $ 545 and VAT, if higher, then $ 1089 and VAT;
- mortgage registration payment – up to 0.25% and $79;
- Title Deed registration – $ 68.
Also, as part of the expenses for the purchase of real estate in Dubai, it is worth taking into account additional fees for the evaluation of the object and mortgage registration, which vary from different banks.
A prerequisite is life insurance. To prevent financial institutions from increasing the % rate by adding a monthly insurance premium, pay the entire cost of the policy in advance. On average, this is $29.4 per month with a loan of $272,000.
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