Reasons why foreigners purchase property in Dubai

Whether you are a tourist, foreign professional, investor, or businessman, it’s most likely that you have already come across Dubai’s popularity with regard to real estate on more than one occasion.

So if you are one of the few who has encountered this sort of thing, then you might even already have taken the chance to invest in the Emirate’s real estate sector.

What makes Dubai real estate so appealing to foreign investors? In this article, we will answer this question for you by exploring Dubai’s most attractive features and by explaining its local real estate market as briefly but comprehensively as possible.

Content:

• The real estate market in Dubai
• Security operations for foreign investors
• State control
• What type of foreigner is interested in Dubai as an investment destination?
• We will assist you to purchase a property in Dubai

The real estate market in Dubai

More than 60,000 new properties are being built in Dubai every year. With this in mind then, Dubai developers are planning to construct at least 550,000 new buildings by 2040.

It’s important to know that bigger properties have an ROI (return on investment). So if a property receives a high ROI, it means that the return on investment compares favorably with the value of the investment itself. What’s more, the overall ROI rate in the Emirate can range from 8 to 15%. This is one of the highest percentages in the entire world.

Furthermore, the construction industry and its investments account for 10 to 20% of the total GDP of the Emirate. Additionally, the strengths of the real estate sector are as follows for investors:

• Developed economic platform and market infrastructure.
• Appropriate government rules and regulations.
• A highly developed technology sector.
• A High gross income of 5.19% per annum.
• A wide range of offers are available for almost any type of real estate, namely, apartments, villas, townhouses, penthouses, hostels, office premises, storage and sorting spaces, exhibition grounds, hotels, land plots, and so on.

Moreover, investing in real estate provides one with a high gross income. In other words, you’ll have a high net income this is the level of profit that can be obtained through the provision of leases or through the resale of real estate before deducting any costs. Here, the standard gross income is around 10%.

As for off-plan projects ( properties that are under construction), the gross income can reach up to 80-90% of the purchase price.

Security operations for foreign investors

Dubai offers foreigners the possibility to obtain a mortgage and use a significant number of different options for installments when purchasing a property. These installments, in particular, we mean payment plans, are common in the off-plan real estate sector.

The last sector mentioned contains a wide range of different measures to protect investors. This can include anything from construction delays, project cancellations, booking cancellations, fraudulent activities, to unfair speculation.

For example, one of the laws passed not so long ago requires that the developer and the contractor pay a certain deposit to the bank(s). This amount, which is 20% and 10% percent, respectively, comes from the fund for the construction of the facility.

In addition, real estate can also be purchased through a legal entity opened in the Emirate, if you are the owner or shareholder.

This gives one individual benefits and most importantly, confidentiality. And since only the owner of the company's property is registered, there is no indication of how (for who or what purpose) it can be used via the company.

When applying for a mortgage, there are options such as purchasing and selling property available, even if the buyer and seller do not have the required amount of finance and have resorted to using a mortgage loan. In other words, the seller has an outstanding loan for the property being sold and the buyer turns to the bank for help, requiring money for the purchase of this property. Banks, as a rule, can cover up to 80% of the total purchase price with credit money.

For big investors, there are various visa requirements. For instance, there are resident gold cards, which are visas for foreigners and remote workers. Also, there are discount visas, which are visas for retirees.

Below are some examples of how to obtain different types of visas:

• If the value of a property exceeds $ 2.72 million, then the visa is granted for 10 years.
• In order to own a five-year visa, you are required to have real estate to the amount of $ 1.36 million.
• For persons whose real estate value is more than 272 thousand US dollars, a visa is available for a period of three years.

Furthermore, the state established a “maximum rate” system, particularly where tenants and limited price increases are concerned. For example, the landlord has the opportunity to change the rental price once a year only. Also, the rental price can only be changed if the old contract is no longer valid and the tenant(s) agrees to conclude a new one. In this case, which is the most critical case, the landlord will not be able to increase the rate by more than 20%.

State control

In Dubai, there is a convenient tax policy that has been established. What’s more, the Emirate does not levy personal income tax, property, or land taxes.

Furthermore, a significant part of the costs falls on the shoulders of the investor and is carried out through small indirect fees. For example, payment can be in the form of duties and VAT.

The following is important to consider for an individual investor:

• If the landlord enters into a contract with the management company in order to provide the lease, then no commissions will be paid by the owner of the property.
• If you want to ensure your house, banks can offer you a standard rate of $ 95 per month or premium insurance at a price of $ 408 per month.
• Of course, it’s also necessary to pay for utilities such as water, electricity, gas, etc. So in UAE, the most “difficult” time in terms of spending is during summer. Typically, the property owner pays $ 490 monthly for utilities during this period.
• You will be obligated to pay the government 4% of the total transaction amount for each real estate transaction.
• You are expected to pay 5% of the rental rate annually if you rent a living space. Or if you own a house, you’re expected to pay 0.5% of the house purchase price, if it’s your property. This is called “municipal tax”.
• Property owners, as we have already mentioned, do not pay property and land tax.
• You will need to pay for the collection and disposal of waste (garbage, etc.). This will cost about $ 27-54 per 1 sq. m. of property annually.

Owning real estate in Dubai is fairly inexpensive for the most part. This is especially true when comparing Dubai’s overall costs to other developed real estate markets.

Moreover, Dubai owners who pay taxes on their own undeniably spend less money than other owners in most Western countries.

In addition, Dubai also provides foreigners with two comfortable ways to own real estate, namely, freehold ownership and leasehold ownership.

Freehold ownership involves the purchase of property for a person’s absolute, unconditional, unlimited use. Its only limitation lies in the fact that the purchase of such a property is possible only in certain designated areas. Today, there is a list of 64 districts that fall under these designated areas. This list can be accessed directly via the official websites of the Dubai authorities.

The second type of ownership, leasehold involves the lease of property rights for 10-99 years. This type of property is becoming more and more diverse and readily accessible in more areas, especially as it’s becoming more widely distributed.

There’s no doubt that Dubai has a technologically advanced real estate market since it provides a considerable amount of opportunities where the purchase and work of real estate is concerned, especially in online resources.

The list of publicly available functions includes features such as:

• Participation in a variety of preferential programs.
• Purchase and sale of real estate.
• Registration of licenses and permits.
• Business registration.
• Connection of various services, including utilities and insurance.
• Calculation of tax expenses and rental rates.

What type of foreigner is interested in Dubai as an investment destination?

The emirate is attractive to people from all over the world. This includes both buyers and investors of various income levels, as well as, those who are looking to make money on real estate and those who are looking for their ideal resort or permanent housing.

In 2017, Dubai’s real estate market was recorded as having the highest popularity of visitors out of any other country. This included visitors from India, Saudi Arabia, Great Britain, the USA, and Pakistan. Moreover, Indians accounted for 19% of all real estate transactions, followed by Saudis at 16%, British at 15%, Americans at 13%, and Pakistanis at 10%, respectively.

At the beginning of 2019, investors from China began to appear on Dubai’s real estate market radar. Subsequently, they injected more than $ 460 million into the sector.

In 2020, the economic industry underwent difficulties and the real estate sector contributed only 7.2% to Dubai's GDP. Yet despite this, the influx of foreign citizens continued. Investors from China approached the top three. And the dozen included buyers from Canada, Jordan, and Egypt.

So Dubai found its main source of foreign investments from the interest and support of some of the above-mentioned countries. As a matter of fact, there are other countries such as Russia who are also on this list. Particularly, since Russian citizens make up a fairly significant part of the Emirate's investment market. For instance, when looking back to 2017, Russian investors were ranked seventh out of all the other investors in the city and appeared on the Emirate’s real estate foreign investments list. Moreover, in 2021 they were approaching the top five investors on this list. Furthermore, a fairly big Dubai developer, Seven Tides announced in January this year that Russian investors provided 18% of their total sales, the total amount of which was $ 125 million.

Dubai rarely builds projects separately. Most often, any type of construction is generally part of some bigger project. Like a megaproject, which has huge coverage of the Emirates. In this way, projects develop organically and form part of a single infrastructure that has all the benefits. Most importantly, it also comprises materials that are highly environmentally friendly.

So while the environmentally-friendly type of construction is a new trend in Dubai, it’s already starting to play a significant part in the rest estate market. This can be seen in the many developers who are interested in increasing their share of “green real estate” in their own securities portfolio.

We will assist you to purchase a property in Dubai

If you’re curious about the possibility of investing money in the real estate sector in Dubai, we suggest you contact the services of our experts. We specialize in the selection and appraisal of real estate. In addition, we provide you with the professional services of our financial analysts and lawyers as well. They are reliable, highly knowledgeable and able to answer all your questions. Get in touch with us today and let us guide you to choose the right investment for you.