Buyer beware when purchasing a property in Dubai

Buyer beware! It’s a warning most of us are familiar with.
In the context of purchasing a property overseas, in Dubai or some other city
or town in the United Arab Emirates (UAE), for example, it’s a warning well
worth heeding.

Taking out a home loan in the UAE from HSBC, or from any one
of the country’s other multinational or domestic banks, is a serious
undertaking. Expatriates, in particular, need to think long and hard about the
commitment, and to seek professional advice throughout the process. After all,
you’re not applying
for a personal loan or opening a simple current account.

The British Embassy in the UAE strongly advises expatriates
to do their homework before making a property purchase.

The embassy says, “Buying property is often the largest
transaction in monetary terms that most people ever undertake.  It can be a huge financial commitment,
regardless of where you are in the world. Dubai is no different in that
respect. Its relative immaturity as a legal system makes it even more
imperative that you exercise care and attention, taking the precautions that
you would in any other jurisdiction.”

Expatriates should research as much as possible the area the
property is in, advises the embassy. They should visit the Dubai Land
Department website which has lots of information and details of possible fees
which may be charged.

The embassy says, “Dubai has no income tax but does charge
fees on certain types of transactions including property purchases.”

Expatriates need to be clear about why they are buying
property, whether simply as somewhere to live or as an investment. Knowing the
answer can help speed up the search for a suitable property.

The embassy continues, “There are numerous international
real estate brokers who can assist you with your purchase. Find one that is
registered with the Dubai Land Department. Don’t be afraid to ask up front what
their costs will be.”  And it also
urges expatriates to obtain accurate and experienced legal advice in advance of
buying any property. Such a sensible precaution can highlight potential risks.
To that end, the embassy provides useful links to pages containing lists of
lawyers and translators.

Mortgages are much in the news in the UAE at the moment with
the country’s central bank announcing it wants bank mortgage lending to
expatriates capped at 50% for a first property, and then 40% on any subsequent
property purchase.

The reasoning behind the move appears to be prevention of
the levels of real estate speculation seen in Dubai during 2007 and 2008, and
which led to a property bubble.

But the country’s banks believe the cap, which means
expatriates having to pay a deposit of half the value of the property, is much
too high and are calling for the lending ceiling to be raised to 60%.
Otherwise, they fear, the recovery seen in the property market during 2012
might be placed in jeopardy.

UAE nationals wishing to buy property
will also be affected. However, they’ll have to find a deposit of 30% for a
first property, and 40% for a second one.

If you are in need of experienced legal advice or a
translator, check out the list of links provided by the UK embassy here.