Over the years, severe restrictions and regional instability have gradually been alienating foreign citizens from countries in the Middle East, particularly in the UAE. However, years of purposeful development and a number of reforms seem to have done the trick. The United Arab Emirates is now one of the most favorable places to live and have a successful career and this is in part due to factors such as a strong tourism sector, an advanced infrastructure, an extensive real estate market, maximum transparency, and attractive business opportunities.
This is why, for many people purchasing a home in the UAE, in particular, in Dubai is an important decision. But first, let’s familiarize ourselves with some of the key features one needs to be on the lookout for before making this purchase.
Key features of purchasing real estate in the UAE
It is important to get to know:
In the United Arab Emirates, there are 3 types of property, namely, free-hold zones, common-hold zones, and lase-hold zones. This will be very difficult for any ordinary buyer to understand on their own, so we recommend the support of a good lawyer. Otherwise, you could end up making a lot of mistakes. And while we do recommend that you get expert advice, we also recommend that you get to know some of the following legal frameworks:
1. Free-Hold zones
In these types of areas, the ownership of property refers solely to the buyer of the plot/property. That is to say, the owner is the rightful owner of the plot/property and can dispose of it as they like. Also, Dubai has many free-hold zones. So there is a wide variety of options for foreigners to choose from in areas such as The Greens, Palm Jumeirah, Juzur al-lam, Jumeirah Beach Residence, Dubai Marina, and many more.
2. Common-Hold zones
In these types of areas, the ownership of property refers to owners who have property/properties in apartment buildings, residential complexes, and other objects with a common area. Here, the owners work together to take care of the property.
3. Lase-Holdzones
This type of ownership of property differs from the above-mentioned in that the owner becomes the rightful owner only after paying the value of the real estate property. Also, lase-Hold properties are limited to a period of ownership (20-99 years), during which time the tenant must regularly pay rent to the landlord.
Advantages of purchasing a home in the UAE
Purchasing a home in the United Arab Emirates in 2022 is a responsible and wise decision that has a lot of advantages to offer, especially in comparison with other countries. Some of these advantages include but are not limited to the following:
1. Regional security
The UAE is the safest and most peaceful country in the world. There is no political unrest and public order is strictly coordinated in accordance with local laws. Speaking of local laws, they are particularly harsh here. Especially since the death penalty is provided for some offenses. But in many ways, this helps to preserve the peace, as well as, the overall high level of well-being where the residents are concerned. Furthermore, according to a survey conducted on some of the residents here in the UAE, more than 90% of them feel happy and safe even at night.
2. Favorable climate
In the UAE, one can enjoy the sea and sun all year round as the weather remains wonderfully warm throughout! Also, these conditions are especially attractive for people who prefer warmer climatic conditions. What’s more, the new buildings are well-equipped for ensuring the optimum temperature and maintaining a comfortable microclimate.
3. The absence of taxes
In the UAE, there are unique conditions in which foreign citizens can benefit from living comfortably and doing business profitably. This means that there is no value-added tax and no personal income tax for them, as well as, no real estate tax in some areas. Is it any wonder that the tax system in the UAE is considered one of the most agreeable in the world for doing business.
4. Free ownership of property
When purchasing a home in a free-hold zone, you become the rightful owner. This means that you can dispose of the real estate in any way you want. So whether you decide to resell it, rent it out for the long-term (for several years) or short-term, give it always as a gift, or even alienate it, the decision is entirely up to you. Also, this right will later be transferred to your heirs. So as you can see, you are guaranteed 100% benefit from your investment as it will bring you both profit and pleasure.
5. Conscientious developers
The real estate market in the UAE, in particular Dubai, is very dynamic and fast-growing. Yet, despite this, there are no cases of buyers being conned here. A major reason for this is because only licensed developers with trustworthy reputations have the right to approve the construction of any projects.
6. Control of transactions at the government level
The local government is interested in foreign buyers and new investments. As such, it very closely monitors compliance with legal norms. Additional agreements are also provided by large developers who participate in the finalizing of these transactions.
7. Purchasing real estate as a way to obtain a residence permit
Resident visas are a special initiative that was adopted in 2019 in the United Arab Emirates. This program allows foreign citizens to obtain a similar residence permit to those of permanent residents for a period of 5 and 10 years. Moreover, this so-called "Golden Visa" allows one to achieve a mutually beneficial relationship between the UAE and foreign expats. So in this way, the country receives new investments and increases its capital, while foreigners get the opportunity to move to the UAE, build their own business here, or lead a comfortable and quiet life.
What’s more, visas are issued for a period of 5 and 10 years. So for a 5-year visa, the minimum investment amount is around 1.35 million dollars – 5 million AED. And for a 10-year visa, the minimum investment amount is around 2.72 million dollars – 10 million AED.
Also, you can extend this visa for as long as you want, while continuing to own property and comply with the laws of the United Arab Emirates. Furthermore, property can be owned by either a man and a woman. However, there is only one specification where this is concerned. That is, if the property is registered to the father of the family, the ownership rights automatically pass along to the wife and children. Whereas, if the owner of the property is a woman, she cannot sponsor her children or husband.
8. The possibility of lending
In the UAE, foreign citizens have the opportunity to take out a mortgage when purchasing property. However, one must be a fairly law-abiding person with a good credit history and a stable income. In addition, to avoid problems where debts and loan evasion are concerned, the bank must be confident with its customers’ creditworthiness. Therefore, when you receive a loan from the bank, you will be required to:
- Provide a UAE resident visa.
- Provide a list of required documents with credit history confirmation.
- Show that 50% of the amount is available for the purchase of housing.
- Provide other property (other than what you plan to purchase) as collateral to the bank.
Furthermore, mortgages are issued for a period of between 15 and 25 years.
9. Flexible opportunities for investing in housing in the primary and secondary market
In the UAE and Dubai in particular, the real estate market has a wide variety of housing options available for you. This includes both brand new properties, as well as, already used properties. There is also an option to invest in the purchase of an apartment in a residential complex already under construction. Also, usually where secondary housing is concerned the contract with the developer is concluded at the initial stage of construction of the property. As such, you will have to wait until the end of construction for this. Despite this though secondary housing can still be a very profitable purchase for the following reasons:
- You can pay for the apartment in installments.
- You won’t have to pay too much, since the apartment is bought at a fixed price. This is a significant advantage, given the rate of price growth in the local real estate market.
Also, secondary housing is usually cheaper than primary housing (apartments in new buildings). Furthermore, where primary housing is concerned you do not have to wait for the completion of construction since after the purchase you can immediately move in.
10. Price justifies quality
The real estate market in the UAE, in particular, Dubai is developing at an accelerated pace. This means that the demand is currently more than the supply, forming a decent cost per square meter of housing. What’s more, pricing is also influenced by factors such as the location and how new the property and area are. In addition, the more space the property has, the lower the price per m2. For example, an apartment in a residential complex can easily cost at least 2.5 thousand dollars. Whereas, the cost of a villa can easily cost at least 1.5 thousand dollars.
So for residents of the CIS, these prices may seem unreasonably high. However, it is worth considering, especially since housing is often sold with a ready-made high-quality repair so that after the purchase the buyer can immediately move in and settle down.
Disadvantages of purchasing a home in the UAE
One needs to take into account the many disadvantages that come with purchasing a home. Therefore, this section of this article focuses on the potential difficulties or even some of the obstacles one might encounter when it comes to purchasing a home in the United Arab Emirates. The following are considered important disadvantages to take note of:
1. Religiosity
The UAE is a predominantly Muslim country. This means that it has its own beliefs customs, and a strict system of public services that constantly keeps ordering. And this applies to both residents and tourists. What’s more, the country has a very disapproving attitude towards alcohol, smoking, and gambling. For instance, drinking alcohol on the streets is strictly prohibited. In addition, extramarital cohabitation, homosexual relations, and wearing revealing outfits are also prohibited. Although, on the one hand, non-serious cases that involve violating the established norms are a fine and only result in the mildest penalty. While on the other hand, the more serious cases involve deportation.
2. Tax on the purchase of secondary housing
Contrary to popular belief that the UAE is a tax-free country, there are exceptions. That is to say, in the UAE they don’t really charge VAT, profit tax, etc. However, the state will still have to pay for this in some cases. For instance, when it comes to the purchase of real estate in the secondary housing market. Here, one must pay a 2% tax on the cost of the purchased property. Also, this tax is considered to be the responsibility of the buyer and not that of the seller. In addition to this, one can also include shipping costs and payment for real estate services.
3. Participation of an intermediary in the home purchase process
The purchase of an apartment, plot of land, or other types of real estate transaction must always be accompanied by the participation of an intermediary, for example, a real estate agent. The main reason for this is so that it ensures the integrity of the transaction with the sellers, while at the same time protecting against any fraudulent schemes. In addition, this also guarantees compliance from both the state and the seller where the legal framework is concerned.
