admin
The risks of buying a property in Dubai must be taken seriously when deciding to invest in the real estate market in this city.
Dubai is renowned for its unparalleled architecture, lush lifestyle, and tax-free business environment. These elements make Dubai an appealing destination for investors deciding to purchase property in Dubai.
Still, like any other investment, purchasing a property in Dubai has some specific risks. Here we will explain some of the main risks related to purchasing a property in Dubai.
The main risks of buying a house in Dubai
As you know, the advantages of purchasing a property in Dubai are a lot. With incredible advancements and flourishing tourism, more people want to live there.
Still, you must be aware of the risks of buying a house in Dubai if you decide to invest in this wonderful city. Here are some potential risks of purchasing a house in Dubai that you must pay attention to. These risks include:
- Low rental yield areas
- The reliability of the developer
- Real-estate frauds
- Construction delays
- The quality of the real estate
- Installments and mortgage
- Unpredictable expenses
1. Low rental yield areas
The major reason people invest in Dubai is because of the amazing rental yields. People can expect to get 5-12% of the annual rental yield according to the type of property, surroundings, and facilities.
A few places in the city are not good enough, so it is not reasonable to invest in them. So, consult with an expert to benefit from your investment as much as possible.
2. The reliability of the developer
Irrespective of the type of property the investor selects, whether it is completed or under construction, it is necessary not to make a buying decision based on a picture.
It is essential to see the place in person and meet with the developer’s agent or your real estate agent.
To obtain a better understanding, it would be useful to juxtapose the selected property with other properties of an identical class in the same location.
If the purchaser is thinking about secondary market listings, it would be advisable for them to establish contact with the complex’s residents.
They can collect precious insights into the facility management company, the total upkeep of the complex, and whether the existing residents are pleased with their living experience or not.
When meeting brokers or sales offices, it is necessary to check their registration with the Real Estate Regulatory Agency (RERA).
Dubai has remarkably increased its overseeing of real estate transactions and market players, but unluckily, some people may still try to disobey the rules.
3. Real-estate frauds
Selecting a trustworthy real estate agent is essential since there are many throughout the whole nation. While it occurs very rarely, some investors have become infected with dishonest people.
Consequently, you should be cautious when investing. Try to find licensed vendors and ensure to investigate the individual completely.
4. Construction delays
Even though developers in Dubai pay huge penalties if they go beyond their construction completion date, most of the new projects in Dubai exceed their completion date.
It is something unavoidable. Perhaps you should concentrate on how considerable the delays were on the developer’s previous developments.
5. The quality of the real estate
One of the risks of buying a property in Dubai is that the real estate bought at the construction stage may not be as good and visually attractive as it was depicted in the advertising brochures at the sales office.
To reduce these risks, it is recommended to do comprehensive research on the developer’s past performance and obtain feedback from their customers.
It is also important to note that each developer is an expert in specific types of projects.
For example, if you understand that a developer selling a new high-end residential complex has chiefly concentrated on inexpensive developments in the past, it may raise logical doubts, even if the price looks very appealing.
Some factors can influence the quality and the value of a property including:
- Location
- Amenities
- Infrastructure
- Availability of land
- Affordability
- Structure
To ensure a good investment decision, it is necessary to perform comprehensive research on the property and the developer’s previous developments, make extra inquiries, and ask for advice from experts.
If the company does not have experience in managing luxury projects, there is a risk that the quality of their property may not be equal to that of others in the same category.
It is also important to take into consideration the pace at which the complex’s infrastructure is being developed.
In many cases, it will be completed last, leading to situations where the buildings are already finished, but the essential infrastructure is not yet developed.
This could probably give rise to problems for those deciding to rent out their apartments since the lack of proper infrastructure can reduce the value of the listing for potential residents.
6. Installments and mortgage
Developers usually offer very attractive payment conditions, like 20/80 or 30/70 payment options. Still, it is essential to know that such plans have high risks.
Choosing to pay just 20% or 30% of the listing’s price as the first installment and counting on future funds gained during the construction stage or securing a mortgage might result in undesirable financial conditions after 2 or 3 years.
There’s also the likelihood of not gaining bank sanction for the remaining funds, leaving the purchaser in a difficult state. In such cases, the purchaser might be forced to sell the property immediately, likely at a considerable discount.
It’s necessary to know that having debts in Dubai is regarded as a crime under the legal system.
7. Unpredictable expenses
One common error some real estate purchasers make is that they do not take into consideration all the expenses before buying.
You should incorporate extra expenses into your budget as well. The list of such expenses would involve:
| A DLD (Dubai Land Department) transfer fee | 4% of the property’s price |
| The Title Deed issuing fee | 500 AED ($136) |
| The insurance fee for the sales process | 4,200 AED ($1,100), |
| An agent’s commission | 2% of the property’s price |
| The No Objection Certificate (NOC) issuing fee | 5,000 AED ($1,300). |
This list may become longer or shorter based on the property and buying circumstances. In addition, it is necessary to ask about the cost of utilities.
Another significant facet to take into consideration is facility upkeep costs. Generally, the upkeep expenses for villas or townhouses are low.
Still, for apartments, these expenses can be very considerable. Older apartment complexes, especially, may need considerable technical servicing for elevators, air conditioning systems, and other facilities.
To make a good decision, it is essential to carefully investigate what the upkeep expense involves for each residential complex and whether it is enough for future capital repairs.
Conclusion
To reduce the risks of buying a property in Dubai, comprehensive market research is necessary.
It is essential to have a transparent understanding of the type of property and its location you want to purchase, as well as recognize reliable developers to work with and know the loan conditions presented by banks.
In addition, you should become familiar with all the complexities of real estate contractual affairs and carefully compute potential extra expenses.
