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  • property investing
  • Jul 28, 2020

The Legal Process of Buying an Off-Plan Property in Dubai

Like every other business, real estate brings forth misfortunes and opportunities with itself. There are numerous examples of people who have earned themselves a fortune with real estate investment but many suffered setbacks by making imprudent decisions. Therefore, the whole process requires a lot of deliberation and investigation.

Investing in off-plan property is followed by just one obvious selling statement: the price. However, with cheaper rates come higher risks. Whether a buyer is a newbie or experienced, it very easy and common to commit gravest mistakes. Since the investor acquires the property either earlier or during the duration of the construction stage, so at times it is depicted as a dangerous way of investment option. Having said that, buying property in Dubai, especially the off-plans brings forth potential benefits for the investors. They not only help increase financial gains but also accentuate capital inflows.

This article sheds light on all the legal steps that you should be aware of while planning to buy an off-plan property.

Required Documents

The developer and Dubai Land Department require the following personal identification documents:

(i) Passport Copy

(ii) Visa Page Copy (If applicable)

(iii) Emirates ID Copy (If applicable)

In many cases, your passport copy is sufficient to make a reservation.

Reservation Form

Once you have provided the developers with all the necessary identification documents, they will prepare a reservation form for you. This reservation form typically contains all your personal, contact and property information along with the projected payment plan.

Once completely filled, you and the developer would be asked to sign the reservation form. Meanwhile, you need to make sure that the developer’s official stamp must be there on the reservation form when they deliver it to you.

Sales & Purchase Agreement (SPA)

Undeniably, the most significant piece of the document when buying off-plan property in Dubai is the sales and purchase agreement. Therefore, it is highly recommended to take a draft of SPA from the developer prior to making any payments or signing the reservation form. Make sure to read and thoroughly understand all the terms and conditions. 

Usually, a sales and purchase agreement in Dubai is pretty standard for off-plan properties and it is always accepted by the legal team in Dubai Land Department. Still, if you find any concern regarding some clauses or information in the SPA, feel free to bring it up on the table and clarify with the developer before signing and making the payment.

Your real estate consultant should provide you with all the support and guidance in regards to sales and purchase agreement.

Booking Deposit

Once all the documentation is completed, it is time to book the proposed property. Most of the time, buyers are asked to pay a booking deposit/ down payment. The booking deposit will be according to the agreed payment terms between you and the developer.

The developer should and must provide you with an escrow account in which you will be depositing the funds. The escrow account can be confirmed by visiting the Dubai Land Department’s website.

Registration Fee

As per the conditions issued by the Dubai Land Department, it is mandatory for developers and investors to register the off-plan property right after its reservation. There is a 4% registration fee that should be paid to the Dubai Land Department in the form of the Manager’s Cheque.

For those who don’t have a bank account in UAE, they can speak with the developer to provide them with an alternate option. Many developers collect the registration fee from investors and submit it directly to the Dubai Land Department on their behalf.

Value Added Tax (Applicable to Commercial Property)

Since the beginning of 2018, a value-added tax (VAT) of 5% was introduced in the emirates. The VAT is valid in the commercial sector only to be paid by the consumer. So, if you are planning to buy a commercial property (ready/ off-plan), you will have to pay 5% VAT to the developer as well.

Brokerage Commission

If you are buying a property directly from the developer, then you don’t need to pay any brokerage commission. However, if you are working with a consultant who is delivering their services to make the right purchase while taking care of all the communication and negotiations with the developer, then there will be a brokerage commission.

The brokerage commission is something on which you and the consultant have agreed upon. The standard practice in Dubai’s real estate market for this commission is 2% of the purchase value.

Pre-Registration Certificate

When you buy a ready property for sale in Dubai, you get a title deed (ownership certificate). However, when you purchase an off-plan property in the city, you will not get a title deed unless the property is ready. The government grants Oqood or Pre-Registration Certificate – a different type of ownership certificate in this regard.

The developer will apply for this certificate with Dubai Land Department instantly after the sale is made and send you an email once it is issued in your name.

Project Completion Date 

As per the clause stated in the SPA concerning the project completion date, the developer will be obliged to deliver the same and complete the construction, then a completion notice will be sent to all clients together.

Inspection & Handover

Once you settled the mandatory payment for handover, you will be invited to examine your property on a certain selected date in coordination with the handover team representing the developer. If you can hire a Professional Snagging team to complete this step, it will give you a huge benefit regarding the quality and condition of the unit for future usage.

In a nutshell, as an investor, you must have a deep understanding of the area, developer, building and real estate market to make the right investment. This is the only way that you can avoid landing yourself in the troubled waters while making an educated and well-informed decision at the same time.

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