The process of buying a property can be extremely exhausting and may cause you trouble but to do it the right way it is important that you find a reliable agency that helps you find a property that is not at the risk of being a fraud. There are a number of risks of buying property in Dubai that many investors do not consider when purchasing a property in that city. This can be a potential harm for the real estate sector of Dubai as they may affect the property’s value which makes it dubious for the buyer who plans to purchase an off-plan property. Therefore, as a new investor these are few of the essential points you should critically analyse beforehand and approach them with a positive mindset.
Knowledge of the developer’s reputation
Legal challenges during an investment are to be expected if the investor lacks knowledge of the factors involved in buying property in Dubai. Some investors have also complained about being scammed by fraudulent developers which is why it is important that you evaluate the authenticity and legal accreditation of the property developers with whom you are going to make the deal. To avoid all the risks of buying property in Dubai it is important for you to keep an eye on the developer’s reputation and their credibility as it makes the choice easier for the buyer to see whether the developer is trustworthy and how well they have performed in terms of meeting the tenant’s requirements.
Unanticipated Charges
After having a thorough analysis you should be prepared to make a checklist of all the factors that need to be taken into consideration before finalizing your plans on buying property in Dubai. Likewise, the charges apart from the value of the property is another essential thing to notice. You will be required to pay different fees including registry and NOC that would cost you around AED 5000. Then comes the broker’s commission which is roughly 2% of the property’s price that has to be paid to the agent for making all the necessary arrangements. An extra cost of AED 4200 is charged for the insurance of sales procedures. The fee of Title Deed is AED 500 whereas, the DLD (Dubai Land Department) takes a transfer fee which costs around 4% of the property’s total value.
Assessing the market volatility
In your search for purchasing property, it is important to notice the market conditions and fluctuation in the value of property due to the shifting trends in the real estate market. The price and future value of the land or apartment you aim to buy has got a lot to do with the market volatility. Over the past two decades the real estate market just as the rest of financial markets has been subject to rapid growth followed by a gradual decline in the prices and its overall value. Such a phenomenon can occur due to the changes in oil prices, UAE’s policy for real estate and the economic instability in global markets due to which the real estate sector experiences such changes in the value of properties.
Regulatory changes
A prerequisite for new investors to beware of is the possibility of shifts in economic dynamics. With the rapid developments in UAE, the government introduces different regulatory laws. This could impact the plans that investors have in purchasing an apartment, thereby making it one of the risks of buying property in Dubai. The government of UAE has stressed multiple times on diversifying its economy from the major sectors of real estate, oil, and tourism which means that there is a possibility of changes in the value of property. Changes in the legal matters of real estate would mean that anyone who wants to buy their dream house or is making an investment in the real estate sector. It is important that these factors should not be overlooked while planning to buy property not only in Dubai but throughout the world.
Dubai Property Law
The legal considerations in buying a property in Dubai is as important as any other factor involved in the real estate business. Especially when the investor is a foreigner and has little knowledge of the property law and all the registry procedures they become easy targets for scammers. To avoid any inconvenience it is important that you know the whole process of legal documentation and whether the property is approved by the relevant authorities. This way you will be safe from falling into real estate frauds or any legal issues. Even though the government of UAE takes all the measures to protect property it is better to be careful and avoid any sort of disputes.
Inconvenience during construction
Another key factor to note is the site of construction before you finalize the purchase of a property. There are multiple risk factors in construction when it comes to buying a property in Dubai. For instance, one of the main risks is the delays in the completion of the construction or compromise on the quality of the property during its construction. Even though this may not happen all the time, to minimize the risk you should be mindful and keep checking on the construction progress of your property to ensure that your keys are delivered to you in its due period without having any delays. The developers set a date according to which they plan to handover the keys to its owner, but at times the construction process exceeds the given time limit.
Financial Planning
An uninformed choice in buying property could lead you to opt for something that is not suitable for your financial situation and investment goals. High initial investment in the real estate sector has flared the spirits of new investors attracting more and more traffic each day to the business. In this regard, you should know that keeping a positive credit profile and finding other investment opportunities will keep your investment secure and decrease the possibility of falling prey to any financial trap.
Currency fluctuations
Devaluation of Dubai’s currency or the fluctuating value of the US dollar may also be a factor you should take note of. Changes in the AED means the price of properties will not be the same as both these factors are closely linked with one another. This means that it is important to add this as a risk factor when making a financial planning as it will give you an edge in evaluating when to purchase property in Dubai, for instance if you notice that AED is performing well in the stock market that is when you should plan to buy an apartment or any other property.
Lower rental yields
There are areas in Dubai with an impressive rental yield varying upto 12% of the total cost of the property. Such numbers may misguide new investors into believing that they can get such rental yields from every area of Dubai which becomes one of the reasons for the buyer’s disappointment because of making unassessed decisions. Thus, you should be aware of the fact that not every property in Dubai has a higher rental yield to offer. If you intend to buy a property in Dubai for the purpose of renting it out, this is the key factor for you to look for during your search for a property that would give you a handsome amount in rental yield.
Lack of due attention to maintenance costs
There are additional fees and taxes on a property that is about to be sold. These charges are exclusive of the property’s price and are ongoing fees such as maintenance charges if you are planning to buy an apartment in a given residential area. Not only are you going to pay for the property, with that comes additional costs of maintenance and VATs. To avoid any financial burden you should know about all the types of extra costs that you will be required to pay on a monthly or annual basis. Anyone who wants to avoid the risks of buying property in Dubai needs to factor such additional charges into the entire investment plan and recognise that the return on investment of well-maintained properties are for longer periods.
Oversupply
When the real estate companies notice that more people are expressing interest in burying property, they begin constructions overzealously without taking prior notice of the market demand. When we take into consideration the occupancy rate of apartments in downtown Dubai, it is at 30 to 40 percent which does not seem to be a good figure in comparison with other modern cities. This eventually disrupts the rental yields as well as the stability of the market by oversupplying of inventory because of which the market demand shrinks further. Many investors do not know that most of the skyscraping residential buildings in Dubai stand empty to this day because of the low occupancy rates. Thus, it is important to have knowledge of these nuances so that your investment goes into the right place and can give you maximum returns.
District Selection
Depending upon your future endeavors and goals, another vital aspect to be mindful of in avoiding any potential downturns while purchasing property in Dubai is the choice of a district that complements your financial plans, investment potential and intending cause behind buying the apartment. For instance if you are investing in a property to rent it out later, it is important to make an informed decision after having assessed the return on investment, ongoing costs, legal charges and other costs that you will have to pay for owning the property. Eventually taking a careful consideration of all these points would keep you away from any issues and disputes.