Commercial transactions for the purchase and sale of real estate (real estate) is one of the most actively developing types of business in the UAE. During the pandemic, the market sank significantly, but after its end it quickly caught up and now shows stable growth. The price level remains high and is comparable to Moscow’s. And yet, for similar money in the UAE, you can buy not just good housing, but a real residence with a swimming pool, gym, barbecue area, parking space and security. The return on such investments ranges from 5 to 12% of annual income, which depends on the community. This is much higher than in Russia (Moscow) or Turkey.
However, in this paradisiacal country, the real estate market is not all cloudless. Not all construction companies have shown themselves to be reliable and responsible entrepreneurs. The number of complaints about the poor quality of commissioned facilities is constantly growing. This circumstance, by the way, also makes the Emirati market related to the Moscow one.
There are problems in both the primary and secondary markets. Against the background of the growing interest of Russian investors in local real estate, we decided to give some tips that will be useful to anyone who plans to invest money in real estate in the UAE.
Primary market risks
There are two dangers for the investor here:
- excessive cost;
- dishonesty of the developer.
At the same time, the second danger may be worse than the first. An unscrupulous developer is a guarantee of poor construction quality, significant violations of the deadlines for commissioning the facility (often up to several years), as well as weak management companies, which will entail many household problems in the future.
The introduction of escrow accounts has improved the situation somewhat. Now you don’t have to worry about the fact that the object will remain unfinished. Otherwise, the developer simply will not receive the money stored in the bank on the escrow account. But the deadlines are still severely violated.
Nevertheless, there is a circumstance that attracts buyers, despite the risks. We are talking about significant discounts, installments and other benefits that developers provide if real estate is purchased at the construction stage. At the same time, the largest discounts apply at the earliest stages of construction.
Hence the conclusion: if you want to buy real estate in the UAE and save money, buy a new building, but be prepared for a delay in delivery. However, not all construction companies are unscrupulous. Many of them have a high reputation and jealously cherish it. Therefore, if you make the right choice, then there will be no problems with the timing and quality of the object.
But it is difficult to resist fraudulent schemes with the sale of unpromising objects through an agent to an inexperienced buyer. In order to interest the latter, the developer places a high commission on such an object. The fact is that the commission is included in the cost of the object. When it is sold, the developer pays the agent a commission. Therefore, the agent is always more interested in selling an unpromising object, since he is guaranteed to receive higher commissions for it. You can protect yourself from such a scheme only by cooperating with trusted and reliable realtors, consultants, and intermediaries.
Secondary market risks
Investors are reluctant to buy real estate on the secondary market. It seems to them that the purchase and sale process is not transparent enough, which means there is a risk of fraud. This is partly true. But here it should be noted that in the UAE, legislation in all areas has been developed and operates very effectively. This also applies to the aspect of protecting the interests of buyers and sellers of the secondary market. Additionally, you can protect yourself by studying some of the nuances of his work.
First of all, you need to have an account and a checkbook at a local bank. This is an important protective element when concluding any trade deal.
The next step to enter the secondary market is to have a receipt for an amount equal to 10% of the value of the purchased object. This financial document is the security of the transaction. After presenting it, the buyer enters into an agreement with the seller, which sets out the condition that if the transaction fails due to the buyer’s fault, the receipt remains with the seller. If the seller is to blame, the buyer will keep the receipt for himself.
While the transaction is at the stage of registration, the check is held by an intermediary agent representing the interests of the buyer.
Unfortunately, fraud still happens in the Emirates. Therefore, in no case should you transfer the check without being immediately handed the contract. Otherwise, if the agent turns out to be unscrupulous, you risk that your check will simply be cashed. You can’t prove anything in an Arab country. However, a respectable representative will never offer to wait for the conclusion of a contract. If you receive such an offer, immediately refuse to cooperate.
The full amount for the purchase is transferred to the seller at the end of the transaction. This is done not in cash, but in checks, which the bank manager helps to issue. After receiving the payment for the sold real estate, the seller returns the security document for 10%.
It’s more difficult if you don’t have a bank account. In this case, you will have to ask someone to write a check or provide a cash deposit, making the transfer of money accordingly.
Another form of deception that is difficult to combat is overstating the purchase price by an unscrupulous agent. For example, if a seller wants to get 1 million AED for his property, a dishonest agent may try to force a purchase at a price of several hundred thousand dirhams more on the client, and put the difference in his pocket. And this is in addition to the standard commission, which he will also receive. Protection against this form of fraud is to work only with trusted consultants and intermediaries.
Contact our company Relocate UAE and protect yourself from unnecessary risks. To do this, fill out a callback request and we will contact you as soon as possible!
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