Requirements for buying a house in Dubai

Are you interested in how you can buy a house in Dubai as an expatriate? Whether you currently live in Germany or are from another country, Dubai welcomes you with open arms. The laws of the United Arab Emirates (UAE) allow you to buy property here and with a few easy-to-follow steps, your dream home in Dubai can become a reality. By the way - houses in the UAE are also commonly referred to as villas.

Legal requirements for buying a house in Dubai

At the Buying a house in Dubai both foreign and domestic buyers must observe certain legal requirements. One important point is the distinction between freehold and leasehold areas. We would like to explain this difference to you below.

The difference between freehold and leasehold areas

Freehold
In these areas, buyers have full ownership of the house and the land on which it stands. This arrangement is particularly attractive to international investors as it grants full control and ownership.

Leasehold
Here, buyers acquire the right to use the house for a certain period of time (usually 99 years), but without retaining ownership of the land. This option is available in some neighbourhoods and can be less expensive. The background is that the UAE does not want the whole country to be permanently bought up by foreign buyers.

Further legal aspects

Dubai Land Department (DLD): All property purchases must be registered with the DLD to officially secure ownership rights.

Conclusion of contract: When buying a property, a sale and purchase agreement (SPA) is essential. This agreement sets out all the terms and conditions of the purchase and protects both the buyer and the seller.

Due diligence: Before the purchase, a thorough examination (due diligence) of the property and the seller is necessary. This includes checking the title deeds, existing encumbrances and other legal obligations.

The legal framework for buying a home in Dubai is designed to protect both buyers and sellers and ensure transparency in the market. It is advisable to obtain comprehensive information and, if necessary, legal advice before buying.

Financial requirements if you want to buy a house in Dubai

Buying a home in Dubai requires careful financial planning and consideration of several cost factors. Here are the key financial requirements that potential buyers should consider:

Necessary financial resources

Equity: In most cases, buyers will need to put up a significant proportion of the purchase price as equity. This can be between 20% and 50% of the property value, depending on the type of property and the terms of the seller or bank.

Financing options: Banks in Dubai offer mortgage loans, but the conditions for foreign buyers are often stricter.
If you are already a resident in Dubai, the bank will finance 80% of the property value on the first financing. This means that you will need to contribute 20% of equity.
For the second property, the bank will only grant you 60% of the property value (if the first property has not yet been paid off and both loans would run in parallel).
Germans residing in Germany must contribute 50% equity if they do it through a UAE bank.
A good credit rating and stable proof of income are prerequisites for obtaining a loan.

The situation is different for off-plan properties or the Construction projects in Dubai. Here, property developers often offer interest-free and flexible payment plans over a certain number of years. This can be an attractive option to spread the financial burden. However, 15% of equity is the minimum you need to contribute.

Additional costs and fees

Dubai Land Department (DLD) Fees: Buyers must pay a registration fee of 4% of the property value to the DLD. This fee is mandatory when purchasing a property.

Brokerage fees: As a rule, an estate agent's commission of around 2% of the purchase price is payable to the estate agent for existing properties.

Contract fees: In addition to the DLD fees, further costs may be incurred for the preparation and notarisation of the purchase agreement.

Maintenance costs: Buyers should also find out about the ongoing maintenance costs of the property. These can vary depending on the location and type of property and include maintenance fees set by the community or property developer.

Information for German buyers

When buying a house in Dubai, there are some special aspects for German buyers to consider in order to ensure a smooth process and avoid potential pitfalls.

Currency and exchange rate

An important point is the exchange rate that applies to foreign transfers. The exchange rate can vary greatly and incur additional costs. It is advisable to keep a close eye on the exchange rate and, if necessary, act in consultation with the bank to secure the best possible rate.

Tax aspects

Rental income: In Dubai, rental income is tax-free, which makes the city particularly attractive for investors. In Germany, on the other hand, rental income is subject to income tax. It is important to find out about the double taxation agreements between the two countries and seek tax advice if necessary in order to avoid double taxation.

Market knowledge and reliable partners

A comprehensive understanding of the property market in Dubai is an advantage. This includes knowledge of current market trends, price developments and the best locations for investment. Equally crucial is choosing a reputable property agent and developer. There are cases of fraud or unreliable property developers, so buyers should check references and only work with recognised partners.

Conclusion

Buying a home in Dubai offers numerous advantages, from potential tax-free rental income to attractive financing options. However, as with any major investment, there are important legal and financial requirements as well as potential pitfalls that need to be considered. With careful planning, a sound knowledge of the market and the choice of reliable partners, international buyers can successfully Invest in the Dubai property market.

If you are interested in a property in Dubai, please get in touch with us free of charge and without obligation. We discuss your goals and wishes and support you on your way to your dream home in Dubai.