Purchasing Real Estate in Dubai for Foreigners

March 5, 2024

Since 2002, foreign nationals have been granted the right to purchase real estate in Dubai. This became a significant event for the development of the emirate’s real estate market and the economy of the UAE as a whole. Nowadays, residential properties in Dubai attract both investors and those planning to move to this country. Let’s look at the nuances of buying real estate in Dubai for foreigners: the benefits of acquiring housing, legal specifics, necessary documents, and other important points.

Can a Foreigner Buy Real Estate in Dubai?

Foreigners, regardless of their country of citizenship, have the right to purchase residential and commercial real estate in Dubai. This can include apartments, studio apartments, townhouses, duplexes, penthouses, villas, or commercial properties (offices, shops, exhibition halls, etc.).

An important nuance is that depending on the location of the property, it can be purchased on a leasehold or freehold basis. Leasehold ownership applies only to the building, not the land beneath it. With freehold ownership, the buyer controls both the building and the land. It’s also important that they get the right to carry out any operations with the property: sell, rent out, bequeath, gift, etc.

Residential properties can only be bought in full private ownership in specific areas of Dubai. The emirate already has several dozen freehold zones, and their list is constantly expanding. The list of freehold zones includes popular areas of the emirate: Bluewaters Island, Business Bay, Downtown Dubai, Dubai Creek Harbour, Jumeirah Beach Residence, Dubai Marina, DAMAC Hills, Dubai Hills Estate, Palm Jumeirah, and many others.

Only UAE nationals and citizens of the Gulf Cooperation Council countries: Qatar, Bahrain, Kuwait, Oman, and Saudi Arabia, can freely purchase property in any part of Dubai.

Advantages of Buying Real Estate in Dubai

Whether it’s worth investing in Dubai’s real estate or buying it for personal use depends on the specific situation. However, generally speaking, there are many advantages to acquiring properties in this emirate:

• Competitive Prices: Compared to other major cities, real estate in Dubai can be purchased at an advantageous cost. This allows investors to achieve a higher return on their invested funds.
• High Rental Yield: Renting out the purchased property can generate a good income. The average yield for villas in Dubai when renting out is about 8%, and for apartments, it’s 9%.
• Favorable Tax System: Dubai’s tax system is favorable for investors, as they are not required to pay taxes when purchasing real estate, its resale, or renting it out. This increases the profitability of owning a property.
• Residence Visa: Investing in real estate grants the buyer the opportunity to apply for a 2-year residence visa for properties worth at least 750,000 AED or a 10-year visa for properties worth at least 2,000,000 AED.
• Comprehensive Property Management: Many companies in Dubai take over the complete management and servicing of the property. A foreign investor can continue living in their country, receiving income from renting out apartments or villas all year round, while a management company handles all the issues.

Buying real estate in Dubai also offers many opportunities for a fabulous vacation by the sea and a luxurious lifestyle.

Documents Required for Purchasing Real Estate in Dubai

The Dubai real estate market is open to non-resident investors, meaning there’s no need to obtain residency to purchase residential or commercial property.

Buyers of real estate in Dubai will need the following documents to complete a transaction:

• Passport and other documents confirming the buyer’s identity (driver’s license);
• A visa valid for at least 6 months for visiting the country and conducting the property purchase transaction;
• Approval from the Dubai Land Department (DLD);
• Proof of funds for purchasing the property.

When finalizing the purchase, the parties sign a contract that includes all the transaction terms, including price, payment dates, property details, and other nuances. The contract is concluded in accordance with UAE rules and must be verified by DLD to ensure the transaction is legal and legitimate.

Taxes and Fees When Purchasing Real Estate in Dubai

One of the significant reasons for the popularity of investments in Dubai’s real estate is the absence of taxes. The UAE government has created a tax system that supports the concept of tax-free to encourage foreign investments. Foreigners do not have to pay taxes when buying residential or commercial real estate and when renting it out. This creates a healthy investment environment.

Despite the absence of taxes, several mandatory fees are associated with purchasing real estate in Dubai:

• Transfer fee: A fee for the transfer of ownership rights charged by the Dubai Land Department, which is 4% of the property’s value, plus a fixed administrative fee of 580 AED;
• Registration fee: A fee for registering the property, ranging between 2000–4000 AED (depending on the property’s value);
• Title Deed: A fee for obtaining the property title deed, amounting to 250 AED.

If the foreign buyer is not yet a UAE resident, by law, they can only buy or sell property through a licensed realtor. The realtor’s services must also be paid for, but only if the property is purchased on the secondary market. On the primary market, the seller, i.e., the developer, pays for the specialist’s services.

Residency in Dubai When Purchasing Real Estate

Purchasing real estate in Dubai allows foreigners to apply for residency. To obtain a UAE residency visa through investments in real estate, one needs to buy an apartment, villa, or other immovable property in one of the freehold zones. The applicant must be over 18 years old, have a legal income, no criminal record, and no dangerous diseases.

Buying property worth at least 750,000 AED (more than $200,000) qualifies for a 2-year residency visa. Spouses have the right to enter into a joint ownership agreement provided the property is worth at least 1,000,000 dirhams (more than $270,000).

For a “golden visa” in the UAE, valid for 10 years, the investment in Dubai real estate must be at least 2,000,000 dirhams, approximately $550,000. If the full amount is not available, a mortgage can be arranged, but in this case, the initial payment must be at least 50%.

UAE residents can live in the country without restrictions and enjoy all the privileges of the status: optimize taxes, open a bank account, conduct business, obtain a driver’s license, access healthcare, etc.

Mortgage in Dubai for Foreigners

Foreigners can buy real estate in Dubai not only by paying the full price but also with a mortgage. A mortgage can be arranged at a state or private bank. The conditions for granting a mortgage to a foreign investor depend on the chosen bank, but there are general rules.

While a resident can apply for a mortgage amounting to up to 80% of the property’s value, non-residents have less attractive conditions. Foreign investors must make a minimum down payment of 50% of the property’s value, and the remaining 50% can be mortgaged.

Other mortgage requirements in Dubai include:

• The age of the real estate buyer should be between 25 and 65 years;
• The maximum mortgage term is 25 years, but the last payment must be made before the applicant reaches retirement age;
• The amount of monthly payments should not exceed 50% of the borrower’s income, and after all payments, they should have at least $900 for each family member.

Employment and property ownership in the UAE are not mandatory conditions but can be a bonus for increasing the chances of mortgage approval.

The Procedure for Purchasing Real Estate in Dubai

As mentioned earlier, non-resident foreign investors buy real estate in Dubai with the participation of a realtor. An experienced specialist already knows all the nuances and pitfalls of transactions, so they can help make everything legal and beneficial for the buyer.

Despite the help of a realtor, it wouldn’t hurt for the investor to know how the procedure for purchasing real estate on the primary market in Dubai works:

• Choosing a property: Depending on the budget and purchase purpose, the realtor selects several apartment or villa options that might suit the buyer. It’s possible to choose real estate remotely.
• Signing the sales contract: The parties sign a contract that records the main parameters of the deal, such as the property’s cost, its address, the date of the house’s commissioning, etc.
• Obtaining a no-objection certificate: When buying real estate with a mortgage, the investor needs to obtain a no-objection certificate (NOC) from the bank. The developer will require a payment schedule and a property transfer certificate.
• Registering ownership rights: The buyer deposits the remaining amount into an escrow account, after which the transaction is registered with the Dubai Land Department.

After registering ownership rights, the buyer becomes the full owner of the real estate and can dispose of it at their discretion. If the property was purchased for investment purposes, it can be resold or rented out with the help of a management company, ensuring a stable income.