Investing in UAE property – The good, bad and very ugly

Investing in UAE property - A complete guide to stop you getting burnt

Investing in UAE property

A guide to Investing in UAE property

The federation of UAE comprises of seven autonomous states. Each of these states have different sets of laws governing the real estate industry. However, one common thing about the states of UAE is that foreigners are only allowed to own invest in UAE property through direct leasing contracts which can extend up to 99 years.

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Investing in the UAE property industry comes with a lot of advantages because of the booming business and the ever growing demand due to then steady population increases over the past few years, however for the unaware investor investing in UAE real estate for the first time the opportunity to buy into a bad investment is ever present.

The boom and bust years

During the boom and busy years from 2004 until 2008 Dubai especially had a booming real estate market, many properties were being sold based on vague plans and hastily constructed to scale models, real estate was being “flogged” in many of the malls and the market for OFF PLAN investments was interstellar, that is of course until it all came tumbling down in the crash of 2008.

Still today there are tens if not hundreds of millions of dollars invested with bad real estate companies that will never complete the build on the property they have sold off plan to thousands of naive investors looking to make some fast money. Before you considering making any decision in investing in UAE property that may be off plan consider this very carefully.

Methods of investing in UAE property

There are two ways of investing in UAE property markets; one is by directly putting up new property while the second one is through acquiring already built properties or buying off plan properties and flipping them to another investor further down the market cycle.  It was this process of flipping that greatly increased speculative investment in UAE property investments and it was also one of the key reasons why the market fell to an all time low in 2008.  The process of flipping and speculative investment still goes on however as it is a quick way to start investing in UAE property without ever actually having the intention to buy.

If you are intending to construct and then re-sell real estate the first thing that you will be required to do is to be licensed by the authorities before you can start the investment process. After obtaining the license you can then proceed ahead and identify property developers or land agents to help you identify the potential regions where you can invest.

You must make sure that the before investing in UAE real estate that the property developer you are dealing with is registered and licensed. It is illegal to do business with unregistered agents. The UAE is now starting to implement some pretty stringent real estate laws to protect the consumer after the bottom fell out of the market, that being said it is still very easy to get burnt.

After identifying land the next step is to carry out a search with the relevant authorities and establish if the land is registered and it has any dispute regarding its ownership. The process of getting the land title deed then begins after which you can now concentrate on developing the land.

The second method of investing in UAE proprerty is buying acquiring already developed property. The process is very simple because all you need to do is to identify a property on sale and place your offer either directly or through a real estate agent. If you choose wisely the value of your property will of course increase, if you choose unwisely you will be held owning an unsaleable white elephant that brings you zero monetary value.

Market Forces

Although there is currently a resurgence in the UAE Real Estate Market it is also realistic to expect a pretty reasonable market correction in or before 2015.  There is simply more product availability than there are cash buyers, speculation is again serving to push up market prices and provide false indicators to the market demand for property.

In most UAE states once your purchase offer has been accepted you will be required to pay a deposit which constitutes 15% of the total property value. There is the transfer fee which also has to be paid plus the real estate agents fees.

The law requires that any interested investor must only buy properties from registered property is advisable to seek the help of property lawyers before entering into any kind of agreement with any property developer, if your property developer is new to the market or is pushing you for a commitment on off plan property you may want to think again.

Always carry out extensive research about any property before making up your mind; this prevents any unforeseen troubles relating to the property purchase, it is also a very good idea to walk into the Dubai planning department and ask what future developments are expected or on have been sent for approval close to the area where you are about to but. Also, it is good to confirm if in deed you are allowed to buy property in that particular region, especially if you are a foreign investor.

Because most real estate investors use mortgage funds to develop or buy property, you can also acquire a mortgage facility in any of the UAE states by visiting the main banks or speaking to your financial adviser. In this case you might be required to provide proof of residence, national identity card or passport, bank statements and proof of employment.

Mortgages & Loans

Keep in mind that mortgage rates for buying property in Dubai tend to be a little higher, if you already have a mortgage at home make sure you check to see if any of your home country banks provide better mortgage offers on second properties in Dubai.  Most of them will if it is guaranteed on the equity within your existing property in your home country.

The real estate industry in UAE is a booming business because of the ever increasing market and flexible property regulation and investment laws. The industry is better grounded than it was and most of the banks and other financiers are more than willing to cash in on the booming business by extending mortgages to property buyers as well as developers.

Again make sure that you never have to write a post dated cheque for any mortgage payments, some of the riskier finance companies have been known to ask for this in the past.  The whole point about them loaning you money for a mortgage is that the property is provided as collateral for the loan, do not get caught out.

About John Robberts
John Robberts is a journalist with 12 years experience of living and working in the United Arab Emirates.