Understanding the Buying Process

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The purchase of a property can be divided in 2 major categories:

Ready Property (Secondary Sale/Resale)

Off-plan Property (Primary Sale)

Once the property is selected, an oral offer is made to the Seller. Upon acceptance, formal sales contract is drafted (MOU and Form “F”) and agreed upon between the parties. A deposit is made and given to the Seller’s agent. It is to be noted here that a single agent/agency can represent both the parties. The Buyer obtains financing, if required. Final payment is made on the deed transfer date.

The protocol differs slightly depending on whether one purchases property from a developer, called an “off-plan” property or purchases property from a private Seller, called a “resale” property.

 

Purchasing a Ready Property (Secondary Sale)

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After the acceptance of the oral offer, a sales agreement (MOU) stipulating the terms and conditions is drafted. Once agreed by both parties the MOU is signed along with “Form F”. Form F is now a mandatory agreement issued by Dubai Land Department.

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A 10% deposit is put down by the Buyer. This deposit is usually non-encashable and is held in trust with the Seller’s agency.

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If the Buyer is seeking finance from a bank for the purchase of the property then the bank will raise a request for a property evaluation by contacting one of the property evaluators registered on its panel. The Property evaluation fee is borne by the Buyer.

Note: Regardless of the selling price mentioned on the MOU, the bank gives financing solely on the amount quoted by the Property Evaluator.

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If the Buyer is a finance buyer, i.e. seeking financing from a bank for the purchase, he/she gets a pre approval for the financing. Although it is highly recommended that the Buyer gets a pre approval from a bank prior to signing a MOU and putting down a deposit as many Sellers in today’s market insist that the Buyer making an offer on their property already has a pre-approval.

Getting a mortgage

Mortgages are paid back in monthly installments, with 15 year plans being the most popular. The maximum length of a mortgage plan in Dubai is 25 years. Mortgage repayments, combined with any other monthly expenses, must not exceed 35% of net monthly income, and the total mortgage amount is limited to a figure no more than 60 times the monthly combined household income.

Many of the banks that offer mortgages also offer the option for “pre-approved financing”, which allows the Buyers to have their loan approved prior to choosing their property in Dubai. This expedites the overall process and satisfies those sellers that require financing before agreeing to sign the MOU or purchase agreement. 

Expats will need to present lenders with the following documents:

  • Passport and copies
  • Proof of residence
  • Proof of address
  • Salary certificates or evidence of regular income
  • Bank account statement for 3 - 6 months

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If the property being purchased was bought using financing by the current owner, then the Seller will request his bank to issue a Liability Letter if there is an outstanding amount on the finance or a “No Liability Letter” if there is no outstanding amount on the finance.

Note: The validity of the Liability Letter is for 15 days only, hence the application for the letter should be timed accordingly.

It is to be noted here that clearing of the current liability, if any, is the responsibility of the Seller. But in some cases the Seller requests that the Buyer or the Buyer’s bank settles the liability. Both the options are possible upon mutual agreement.

Once the existing liability (is cleared) the bank will issue 2 sets “No Liability Letters”. The first letter is in the name of the developer of the property and the second letter is in the name of Dubai Land Department.

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Both the seller and the buyer take an appointment at the developer’s (of the property) office to apply for an NOC. The NOC is issued by the developer stating that it has no objection in the Seller selling the property to the Buyer.

Note: The NOC is Buyer specific, i.e. a NOC is issued specifically for a particular Buyer.

The developer takes 3 - 8 days to issue a NOC.

The following documents are required to apply for a NOC:

  • Buyer’s Original Passport and Copies
  • Seller’s Original passport and Copies
  • Copy of the MOU
  • Proof of clearance of the quarterly maintenance fees
  • No Liability Letter from the bank (If applicable)
  • Final Approval of the new financing from the bank (if applicable)

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Both the Buyer and Seller meet at the Registrar’s Office and all payments are made to the Seller in the form of a manager’s cheque.

The property is transferred and the new Title Deed is issued in the name of Buyer.

 

Purchasing an Off-plan Property (Primary Sale)

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 After a property has been identified, the Buyer is required to put down anywhere between 5% - 15% of the total value of the property. The developer issues a reservation form against this payment.

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Most developers will issue a Sales and Purchase Agreement (SPA) upon receiving the second installment of the payment. SPAs are normally issued upon the developer receiving atleast 20% - 25%.

At this stage, the buyer also has to give a payment of 4% of the total value of the property to the developer. This payment is made in the name of the Dubai Land Department and is called “Oqood” fees or property registration fees.

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The Buyer keeps making the payments to the developer based on the payment plan, which is usually construction linked. Some banks also provide finance options once the project is 50% - 70% completed.

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At the time of handover the developer invites the Buyer for snagging the property. The Buyer also needs to pay handover charges to the developer at this stage.

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The property is handed over and the Land Department issues a Title Deed for the property.

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