Dubai is a rapidly developing city in the United Arab Emirates (UAE). The city of gold is known for its opulence that attracts tourists from all across the globe. Moreover, Dubai is not only a tourist hotspot but also a budding ground for real estate investments. Dubai has long opened its doors for foreign investors to make real estate investments and is the only Emirate in the UAE to do so. In this article, let us find out whether it is a good idea to invest in a property in Dubai?
Advantages and Disadvantages of Invest in a Property in Dubai
Before you invest, it is important to know the pros and cons of investing a property in Dubai. Awareness of the perks and risks of buying or investing a property in Dubai helps in shortlisting the right property. Here are the pros and cons of investing a property in Dubai:
Pros of Invest in a Property in Dubai
The Burj Khalifa, Dubai International Airport, Dubai Fountain, Dubai Mall and Palm Jumeirah Island are examples of the Emirate’s infrastructural development. Dubai is known as the home of innovation and bringing impossible projects to reality. The rapid development shows that the city has the potential of generating a higher Return on Investment (ROI).
In the 1960s, the population of Dubai was just about 60,000. Fast-forward to 2020, the population cap reached to 2.9 million inhabitants. The spike in residents made Dubai one of the rapidly growing cities all across the globe. The average annual growth was about 10.7%. An increase in population is directly proportional to the increase in real estate demand.
Higher Rental Returns
Dubai has a higher rental yield, which is about 7%. The rental yield is higher compared to London (2.7%), New York (2.9%), Hong Kong (2.4%) and Singapore (2.5%). The data shows that Dubai is far better in terms of real estate investment than other metropolitans.
No Property Tax
Taxes are a nightmare for real estate investors. Taxes increase the cost and decrease the profits on a real estate investment. However, One of the major advantages of making a real estate investment in Dubai is that the government’s appetite for taxes is low. In Dubai, there is no such thing as property tax. The no property tax makes the real estate investment more profitable.
Cons of Invest in a Property in Dubai
Dubai could be the right place for you if you are making a real estate investment for generating cash flow. However, If you are planning to buy a property to stay in after your retirement then you should be mindful. All Dubai offers is a long-term residence permit. In case you won’t get an extension of your permit for any reason, leaving the country will be your only option.
Spike in Infrastructural Development
As real estate development is booming in Dubai, it could pose a threat to real estate investors. If the supply will outnumber the demand, then the valuation of the property will decrease. Over the last 5 years, the real estate market noticed a 30% decrease in the prices of the property.
Lack of Democracy
In the UAE there is an absence of democracy as the country has Sheikhdom. The rules and regulations can change without prior notice.
Excessive Additional Charges
In order to buy a property directly (off-plan), the individual has to pay a 4% fee of the value of the property to the Dubai Land Department (DLD) for the administration and registration fee of the title deed. If the buyer opts for a mortgage for their new property, then the individual needs to pay an additional 0.25% value of the property to Dubai Land Department for the mortgage registration fee.
Additionally, the individual has to pay a brokerage commission of 2% and the Oqood Certificate (Certificate of getting the property registered by your name) registration fee, which will cost around AED 5,2500. Moreover, the individual will have to pay additional charges such as maintenance of the community/territory. In addition to this, Dubai Electricity and Water Authority (DEWA) will charge you for electricity and water supply as well.
Benefits of Investing Property in Dubai
There are numerous benefits of investing property in Dubai that help both the country and the foreign investors. While it helps in acquiring foreign investments, it also generates employment. Here are the benefits of investing property in Dubai:
Highly Favourable Tax Condition
There are only a few countries in the world, including the Emirate of Dubai, that claim everything you earn is yours to spend. Dubai has an extremely favorable tax condition and this is one of the greatest benefits of investing property in Dubai.
Great Climatic Condition
No doubt, Dubai has great weather with a sun-kissed lifestyle throughout the year. The summer in Dubai is mild compared to the other Gulf cities such as Riyadh and Kuwait. The temperature in Dubai is perfect for settling.
World-class Infrastructure with Safety
In Dubai, there is an ever-increasing demand and supply of infrastructural development, making it a world-class business hub. The government introduced free zones that give total ownership to the business tycoons and entrepreneurs. The free zones are ideal for running your business in Dubai as there is a higher possibility of Return on Investment (ROI). Additionally, Dubai has extremely stringent laws and zero tolerence to crime, making it a safe and crime free place.
Dubai’s MENA region has the most transparent real estate market. The government is fully aware of the transparency benefits that help it acquire foreign investment. Numerous measure have been implemented lately by the Real Estate Regulatory Agency in Dubai’s property market to make it more transparent. Moreover, the new Open Data Law promotes non-confidential data between the government and non-government entities.
Stability and Maturity of the Market
Stability and market maturity are the first two factors that a real estate investor looks up to before making an investment decision. The Dubai property market is stabilized and mature, due to which there is a potential for generating a higher Return on Investment (ROI).
What to Ensure Before invest in a Property in Dubai
Dubai is one of the real estate investment capital of the world. It is possible to buy property in the Emirate even if you are a foreign national or expatriate. The favourable tax condition and real estate market transparency are ideal for making an investment.
Additionally, It is important to know the Dos and Don’ts before making a real estate investment in Dubai. Making real estate investment strictly demands prior experience as it is a cumbersome process. The below-mentioned tips and details will help you get an understanding to make real estate investments in the right manner:
A credit score is the data of an individual’s financial credibility by analysing the payment history. The numeric expression will be somewhere between 300 and 850 if the individual made timely repayment. Irregular payment behaviour will dwindle the credit score. If you are thinking of making a real estate investment in Dubai, it is essential to have a good credit score as it will increase your chance of scoring a considerable mortgage.
It is salient to stick to a budget while making real estate investments. Dubai has become a real estate heaven for investors, entrepreneurs and business tycoons. One should make the budget planning accordingly in order to not spend more than the sanctioned amount. The waterfront apartments, stunning villas and luxurious penthouses can captivate your attention towards the property. However, a planned budget can save you from a lot of trouble and help you generate the right amount of cash flow.
Analysis of Location and Property
If you are a permanent resident of the UAE then you can probably make real estate investments anywhere across the country, unlike foreign nationals and expats. In Dubai, the real estate investment opportunities are limited for foreign investors. As Dubai is the first Emirate to open its doors for foreign nationals and expats to make real estate investments, the operational areas are limited such as Dubai Business Bay, Dubai Downtown, Dubai’s Financial Districts, etc. So it is essential to analyse the location and property to make a real estate investment. Its also important to analyse whether the has a potential to generate the right amount of cash flow.
Exploration of Mortgage Amount
It is possible to know the amount of mortgage one can secure, but it totally depends on your credit score and collateral. The mortgage will certainly help you make a real estate investment and purchase the desired property.
In order to make a real estate investment in Dubai, an individual has to pay a brokerage commission, which is about 2%. Getting a broker to negotiate the investment between the two parties is important, as they do the analytical research and cross-checking of all the pertinent information of the property. A broker helps you find the potential property to invest in a property in Dubai.
Procedure to Invest in a Property in Dubai
The procedure to invest in a property in Dubai starts with analytical research and ends with the possession of the property. In case you are a foreign national or expat, your broker will show you a wide array of properties from the allotted districts. If you are a Dubai citizen, then you can buy property in any district. Post-shortlisting the property, the broker may take you on a field visit if you are physically present in Dubai. Post-approval of the mortgage, you will get the ownership of the property.
Properties in Dubai for expats and Foreign Nationals
Dubai is one of the cultural and corporate hubs in the world. The favourable tax conditions, free zones and ever-growing market and business opportunities are increasingly attracting foreign investors and expats. The government has allowed expats to acquire freehold properties. However, an expat may get the property as high as 80% of the value of properties below the valuation of AED 5,000,000. An expat will certainly have to arrange the rest 20% in order to secure the mortgage.
To Sum Up
It is a good idea to invest in a property in Dubai as Dubai has a mature market. The city has already gained stability, and is ideal for making any sort of investment, including the real estate. Dubai has favourable tax conditions, making real estate investment easy and affordable in Dubai. However, as Dubai is known as the city of gold, it has numerous spectacular properties for individuals that often arouse buyers to spend more than their budget and lands them in trouble. It is important to do analytical research and budgeting before investing.
Note: Analysis and budgeting are critical, so you won’t spend more than you can afford, as there are numerous properties present in Dubai. The waterfront apartments, stunning villas and luxurious penthouses can enthral you and you may end up. By which you will be spending more than the sanctioned amount.
Frequently Asked Questions (FAQs)
Is buying a property in Dubai a good investment?
Yes, buying a property in Dubai is a good investment as there is an ever-increasing demand for property. Dubai is the only Emirate that allows foreign nationals and expats to buy a property. The favourable tax condition and total ownership makes it easy and right to buy a property in Dubai. The city has emerged as a corporate and business hub. Dubai has the potential of getting a higher rental yield on the property. However, for expats, there are limited options wherein they can only buy property in the allotted districts.
What are the benefits of buying a property in Dubai?
Dubai is among those few countries that has a meagre appetite for tax. The stability and maturity of the market benefits the buyers as it lowers the risk of decreasing the value of the property and helps in generating higher rental yields.
Is buying a house in Dubai a good idea?
Buying a house in Dubai is a good idea if you are a Dubai citizen. Unlike Dubai citizens, foreign nationals can’t purchase a house or other properties anywhere around Dubai. The government has allotted specific districts for expats to make real estate investments in Dubai that have the potential for higher rental yields. One must keep in mind that a long-term residence permit is all that the Dubai government offers. If you are buying a house for residential purposes, and you did not get an extension on the permit, then you will have to leave Dubai.