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When planning housing investment strategies, every single detail is quite important. The objectives of people who want to buy an apartment in Dubai are to spread out their budget and correctly calculate expenses.
Let's take a closer look at what determines a budget, what extra costs the buyer pays, and how to calculate the minimum threshold to enter the Emirati real estate market.
Content:
Options for buying affordable housing
Mortgage
One of the options to reduce the cost of buying real estate is a mortgage. Now, the banks of the largest city in the United Arab Emirates are ready to finance up to 80% of housing costs for citizens and up to 50-60% for people who don't have a residence permit. When applying for a loan, you'll need to make an initial payment. The amount depends on different criteria and ranges from 20 to 50%. Non-residents of the UAE will have to pay half the cost of housing. The amount of further payments depend on the mortgage period, the interest rate, the age of the applicant, and their income.
What else is important to know about mortgages in Dubai?
- The average interest rate (for the 1st quarter of 2022) is 3.5% a year (may vary from 2.5 to 6.99%).
- The maximum loan term is 25 years.
- The amount of the monthly payment (Equated Monthly Installments, EMI) shouldn't exceed 25% of the borrower's income.
Note: You can expand your credit opportunities by extending the repayment period. In this case, the monthly payment will be lower but the total interest amount of the loan will increase.
Extra costs for a bank loan and real estate purchase are:
- Mortgage registration – up to 0.25% of the loan volume + AED 290 ($79, ¥503).
- Collection of the Dubai Land Department (DLD) – 4% of the cost of a home.
- Administrative fee in the DLD:
- for apartments and offices – AED 580 ($158, ¥1,006);
- for land plots – AED 430 ($117, ¥745);
- for off-plan real estate – AED 40.40 ($11, ¥70).
- Registration fee for the purchase of real estate is less than AED 500,000 ($136,000, ¥867,000) – AED 2,000 ($545, ¥3,470) + 5% VAT.
- Registration fee for real estate more than AED 500,000 – AED 4,000 ($1,090, ¥6,900) + 5% VAT.
- Registration fee for property titles – AED 250 ($68, ¥433).
In addition to the above fees, you'll need to pay an extra fee for property valuation and mortgage loan processing. Depending on the bank, the amount will vary. The lender can add life insurance to the main loan. With a $272,000 mortgage, the policy costs an average of AED 108 ($29.4, ¥189) per month.
Mortgage loan prices in Dubai by district
To get a better understanding of the cost of buying a home with bank funds, we offer you an example of 3 popular areas of Dubai:
| District | The average cost of a 1-bedroom apartment | Initial payment of 20% | The amount of equated monthly installments (EMI) for 25 years at 3.5% a year |
|---|---|---|---|
| Downtown Dubai | AED 1,500,000 ($408,300, ¥2,600,000) | AED 308,000 ($83,800, ¥537,700) | AED 4,200 ($1,100, ¥7,200) |
| Dubai Marina | AED 1,200,000 ($327,000, ¥2,081,000) | AED 242,000 ($65,800, ¥420,600) | AED 3,300 ($898, ¥5,700) |
| Business Bay | AED 1,400,000 ($321,100, ¥2,400,000) | AED 280,000 ($76,200, ¥485,500) | AED 3,600 ($980, ¥6,200) |
Purchasing an off-plan property
Buying an apartment in a new building in Dubai is another option for a great investment.
- Firstly, it's profitable – off-plan housing is on average 25-30% cheaper than ready-made.
- Secondly, developers offer a convenient payment plan and interest-free installments so that the buyer can plan their budget and save money.
- Thirdly, the initial payment is 10% of the price or more (in some cases, it may be lower and amount to 5%).
Note: The purchase terms and payment plan differ depending on the developer and project. When searching for an investment property, it's necessary to check these things beforehand.
The part of the funds after the initial payment must be paid within the period stated in the contract. Under the developer's terms, the last payment can be made when the keys are handed over or after. Those who plan to rent out real estate or take out a loan from a credit institution will be interested in the second option. So, you can use the rental money to repay the debt to the developer and give a certificate to the bank that the construction is completed for the remaining amount.
For example, in the Peninsula residential off-plan complex in the elite Business Bay area, the initial cost of apartments is AED 640,000 ($175,000, ¥1.100.000). The first payment of 10% will be AED 64,000 ($17,400, ¥111,000). The remaining part will be paid during the construction. When the work is finished, the price of the property will reach AED 3.200.000 ($871,200, ¥5.500.000). So, with this complex, for example, the cost of real estate in a new building in Dubai will increase by 80%.
Payment after commissioning of the project
Some developers offer to make the last payment after the buyer's registration of the title deed. This is an interest-free installment plan, in which payment contributions are given for the entire construction period and several years after the house is put into operation. The installment period can be from 3 to 5 years after the completion of the construction, depending on the developer and the type of project.
For example, when buying apartments in Dubai Hills Estate in the Golf Place II community (it will be commissioned in December 2022), the payment plan looks like this:
- initial payment – 10%;
- first – 10% (3 months after booking);
- second – 5% (10 months after booking);
- third – 5% (after 15 months);
- fourth – 10% (after 20 months);
- fifth – 5% (after 24 months);
- sixth – 5% (after 28 months);
- seventh – 5% (after the project is finished, and it will be put into operation).
You must make contributions from the 8th to the 16th every 4 months after the project is completed, from April 2023 to December 2025.
Emirates.Estate specialists will help you buy real estate in Dubai and advise you on any questions you have.
