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The A to Z of buying property in Abu Dhabi

United Arab Emirates: Wednesday, September 17 - 2008 @ 18:35

These have certainly helped but the process of buying a property remains complicated, especially to those uninitiated in the bureaucratic practices of the UAE.

There are many variations in the procedure as, in the absence of a central authority, each developer and agent practices their own system.

This looks set to improve in the future as land registration bodies are set up and implementation guidelines introduced, however in the meantime, this guide should help you to navigate the system as simply as possible.

The Rules

Only UAE nationals have the right to buy freehold property anywhere in Abu Dhabi. GCC nationals, by turn, have the right to buy freehold property but only in the designated ‘investment zones’ of Al Reem Island, Al Raha Beach and Al Reef Villas.

Foreign nationals can only purchase leasehold contracts within the investment zones; they are not allowed to own freehold properties under current laws.

You do not have to be resident in the UAE to purchase property as a foreign national, but Andrew Covill, head of sales for LLJ Property cautions that, ‘you may be more limited in your local mortgage options if you are living overseas.’

Contrary to the claims of some developers, no property purchase can guarantee buyers a visa. This remains at the discretion of the UAE authorities. The most a developer can promise is assistance in applying for a visa based on the property purchase.

One of the more confusing laws that currently exists concerns ‘surface rights’ that foreign nationals can acquire. These rights give the purchaser entitlements to the ‘air space’ but not the underlying land.

One expert notices that some developers are advertising freehold rights but this can only mean the freehold rights to the property, not to the land itself.

Dubai has recently introduced a Real Estate Regulatory Agency (RERA) and escrow law to officially licence and regulate the industry for investors.

Although no such legislation exists in Abu Dhabi at the moment, the transparency and security the legislation brings to the sector is likely to see the emirate follow suit in the future.

‘You don’t have the same legal framework for protection as in a developed market yet, but a framework is coming in,’ adds Chris Dommett of mortgage broker, John Charcol Dubai.

Where to start

Tempting though it may be to browse the housing market for your dream home before arranging the financial backing, professionals advise the opposite.

‘As prices are increasing relatively quickly it is important to know how much you can afford or are prepared to invest in the property. This can be affected by the product’s payment terms, but before you begin your search, calculate the absolute maximum that you are comfortable with,’ advises Covill.

‘Hidden’ charges can include: Lenders fees, developers fees, real estate broker fees which can add up to 5% to the purchase price. Allow yourself some flex in your budget to accommodate these charges.

‘Mortgage approval is unpredictable and can take a long time,’ says Dommett, contrasting starkly to the often swift property purchase procedure.

Hasty buyers who fail to arrange a mortgage approval in advance may find themselves paying a deposit for a property then racing the clock to get the necessary funds before the completion date on the contract expires: failure to meet the deadline can result in the loss of both the deposit and the property itself.

But Fadi Antar, operations manager of Better Homes Abu Dhabi, cautions that the mortgage arrangements and purchase agreements should be closely coordinated: ‘Often a bank will charge a fee – maybe several thousand dirhams – to give a pre-approval which is only valid for 60 days.’

Failure to secure a purchase agreement in this time can result in the loss of both the pre-approval and fee. Be sure to strike the balance.


A plethora of different mortgages are available in the UAE. They can primarily be divided into ‘conventional’ and ‘Islamic’. The main advantage of Islamic finance is that in off-plan purchases, repayments do not start until the property is handed over.

In terms of the conventional products, a number are available, including some especially devised for the popular ‘buy to let’ market. These products take into account the rental payment revenue when assessing a salary for credit approval.

Those with savings can take advantage of an ‘offset mortgage’ which offsets the amount of money saved against the credit arrangements of the mortgage.

Similarly, some banks will lower the rate on good loan-to-value ratio arrangements – putting a bigger stake down on the property can bring the interest payment down. But this is not a given and many banks will not differentiate.

These are some potential ways of lowering the mortgage rate but they are naturally circumstance-specific. ‘The average rate is about 7% at the moment,’ specifies Dommet, though introductory rates can be significantly lower than this.

He also reports that the Central Bank has recommended that no more than 85% finance be offered by banks to buyers and, while this has not been encoded, it is a caveat worth heeding given the predicted cooling of the market in the future.

Each bank has its own, different products and credit policies. One of the most efficient ways of finding the best one for you is to employ the services of a local mortgage broker.

Look for individual operators who have established links with some of the major developers, as some only deal with a selected number of banks. Avoid bank brokers where possible as they will often only have one or a limited range of products and work on a commission basis.

The minimum age you can obtain a mortgage at is 18. The maximum for most banks is 65, although a handful will stretch to repayment by the time the buyer reaches 70. The repayment period generally runs for 20-25 years.

There are no regulatory bodies for mortgage brokers at present but where possible choose a reputable company that will give independent advice.


The paperwork required by banks for a pre-approval certificate differs between providers and your individual circumstances: employed/self-employed, resident/non-resident.

Generally, these documents will include: a passport copy with visa page, proof of current address, 6-to-12 months of bank statements and pay slips, and a letter from your employer confirming your salary.

If you’re self-employed, you may need to provide these plus: Up to three years worth of audited accounts, and a number of other documents to show the validity of your business. Some banks will also ask for credit card statements as part of their vetting procedure.

Once you have been approved

Once you have been approved, you will be issued with a pre-approval letter. Knowledge of your available deposit, budget and which developers your mortgage provider will fund should help you refine your search.

According to Antar, ‘there are usually three major costs: the price itself, the agency fee and the transfer fee,’ exclusive of any fees associated with the mortgage.

Karen Lay clarifies the arrangement of these costs: ‘When you buy direct from a developer, the price is inclusive. When you buy on the secondary market the additional fees aren’t necessarily included (check with your real estate agent). You will pay 2% of the original purchase price to the developer as a transfer fee and a 2% agency fee.’

Once you have selected your property and put a deposit down (usually 5% to 10%), you will sign an MOU (Memorandum of Understanding) with the developer, noting which property you intend to purchase and its price.

This will be followed by a Sales and Purchase Agreement, which forms the legal contract between the developer and buyer and outlines the finer details.

The bank will then require further paperwork to complete the transaction, including (but not limited to): The MoU, a no-objection certificate from the developer, a formal valuation of the property, personal life insurance documents, personal property insurance documents.

The bank commits to fund the sum stated in the formal valuation, which may differ from the price agreed in the MoU. In this instance, it is the responsibility of the buyer to make up the difference.

The transfer procedure will vary depending on whether you are buying on the primary or secondary market. In a secondary market sale, the seller will add a premium to the original price to represent their profit.

A new MoU will be drawn up and there is typically a transfer fee levied by the developer of 2% of the original purchase price (or sales price, whichever is greater).

The buyer will then also have to pay a commission fee to the purchase price, typically 2% of the purchase price. Antar urges buyers to ensure that the balance payments are settled before proceeding to transfer to avoid unexpected costs and delays.

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Wednesday, September 17- 2008 @ 18:35 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.

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