FAQ – frequently asked questions
- BUYING VS RENTING IN DUBAI
- MORTGAGE VS PAYMENT PLAN
- WHAT YOU SHOULD KNOW ABOUT ESCROW ACCOUNTS IN DUBAI
Do you own a property or are you a long-term renter?
RENTING:
+ ADVANTAGES
✓ Less financial burden
✓ Freedom and mobility of choice
✓ There is no need to solve the property problems
– DISADVANTAGES
✓ Dependence on the landlord
✓ The rent could be used to pay the mortgage
✓ Investment in foreign property
BUYING:
+ ADVANTAGES
✓ An investment that preserves and multiplies capital
✓ Status and independence
✓ Can be rented at 6-10% income or sold at a profit
DISADVANTAGES
✓ Significant financial costs
PROPERTIES FOR RENT IN DUBAI
– Residency required
– Lots of offers
– Protection of rights
WARRANTIES FOR TENANTS:
– Contract for 1 year with state registration
– Notified tenants 12 months before eviction
– State control over rent increases
– Tenant’s consent to access the property
DETAILS:
– The average price of the annual contract is 6-10% of the real estate price
– Payments from 1 to 12 checks per year
– Deposit from $500 to $10,000
– Agency commission 5%
FEATURES OF BUYING IN DUBAI:
– No property and income tax
– Acquisition to full ownership
– Interest-free payment plans from the developer and mortgage are available
DETAILS:
– Deposit 10-30%
– Residency required to obtain a mortgage and income between $3,000 and $4,000
– Average service costs from 20 to 80 USD per m2 per year
– Agency commission 0% on the primary market, 2% on the secondary market
So buy or rent? Whatever your preference, our experts will help you choose the best options.
A mortgage is a type of loan provided by banks that is secured by the property being purchased. In most countries, it is the most popular tool for buying a home.
A payment plan is a method of payment where the price of the property is divided into instalments and paid directly to the developer.
Interest rate:
MORTGAGE: in Dubai the average rate is from 3 to 5% per annum.
PAYMENT PLAN: interest free, no fee
Duration:
MORTGAGE: in Dubai the maximum repayment period is 25 years
PAYMENT PLAN: covers construction period + in some cases extends for another 2-4 years after handover
Deposit:
MORTGAGE: from 20% per Dubai resident, 40% if the buyer already has a mortgage. Due to
the extended duration of the mortgage, the instalments are relatively smaller.
PAYMENT PLAN: 5%-10%
Markets:
MORTGAGE: used in the primary and secondary market
PAYMENT PLAN: primary market only
Resident Emirates:
MORTGAGE: necessary, it is difficult to get a loan without a residence visa
PAYMENT PLAN: resident status not required
- Choosing one of these methods depends on the client’s goals and resources.
- Sometimes both can be used.
- Our experts will help you find the best solution.
Escrow accounts in the real estate market were introduced over 15 years ago by the Government of Dubai to protect the interests of investors.
What does escrow mean?
This is a special bank account to which buyers make payments for off-plan projects. Money is kept until certain obligations are met.
Which law governs escrow accounts?
Law No. 8 Concerning Escrow Accounts for Real Property Development in the Emirate of Dubai dated June 28, 2007.
Who is required to open escrow accounts?
Every developer who wants to sell off-plan properties in Dubai.
What does a developer need to open an escrow?
The developer needs to provide a license, a title deed for the plot, contracts with contractors, project documentation, drawings, etc.
Who manages the account?
The bank acts as an escrow agent and manages the account under the constant supervision of the Dubai Land Department and RERA.
Does the developer use one escrow account for all projects?
No. One project = One account. For each project, the developer needs to open a separate escrow.
Can the developer’s creditors recover funds from the account?
No, the account is not opened for the developer, but for the project and all proceeds are intended exclusively for its construction.
What are the escrow funds for?
To cover the bills of contractors and project consultants. Not all developer costs are billable. Only up to 5% can be used for marketing. General overheads and funds for the purchase of land cannot be paid from the account.
When is the money from the account paid out?
The agreement between the developer and the bank fixes the main stages of construction, to which payments from the account are tied. The bank checks the construction, confirms the completion of the stage and pays directly to contractors.
Are there guarantees after the completion of the project?
Yes, the bank retains 5% of the total amount for 1 year after the handover of the project as a guarantee that the developer will eliminate possible defects.