How much cash you need to buy a Dubai home: Costs, mortgages, payment plans explained
With an increasing number of residents weighing a transition from renting to ownership, real estate analysts said young buyers frequently overlook the ready cash required to buy into the UAE property market and those fees that cannot be funded with debt.
“Typically, a buyer should be looking to have 25-30 per cent of the value of the property available in cash,” said Ismail Al Hammadi, Founder & CEO of IAH Group.
“That includes the down payment — usually 20 per cent for expats and 15 per cent for Emiratis — as well as related costs such as DLD fees, agent commission, valuation and registration.”
For a Dh1 million property, that means “you will need somewhere in the vicinity of Dh250,000 to commence comfortably,” he said.
The upfront cost is the challenge, though - even with lower interest rates and longer repayment periods.
Praveen Khatwani CEO of Karma Developers, which is working on a project in JVC, added that the “four per cent DLD fee and around two per cent agency fee has to be paid through cash”.
“While rates on mortgages have relaxed and terms can go up to 25 years, this upfront cost is still a barrier,” he added.
Income verification and credit history can also delay approvals for younger buyers.
“Yes, it is a challenge for young buyers to get a mortgage because the lending guidelines are so strict around income verification and credit history,” says Yogesh Bulchandani, CEO & Founder of eSunrise Capital. But he said many Australians are coping with financial challenges through a combination of increased financial literacy and improved borrowing conditions.
Flexible payment plans
To help ease this entry barrier, developers are devising more and more creative payment structures targeting first-time younger buyers directly.
Common plans now, according to Mandhani:
-
60/40 or 70/30 during construction
-
Future plans in increasing 20-40 percent over 2-5 years after handover
-
Booking/down payments slashed by 5-10%
-
Leases-purchase, based on how well the developer is known and escrow protection
Al Hammadi said this change is a big reason for the influx of young buyers. “Payment structures have gotten a lot more creative with developers. Many, have post-handover plans extending to 5 years being offered and there are others who have even cut down upfront payments to as low as 10 per cent.”
Developers are increasingly designing plans with younger buyers in mind, Bulchandani said. “Developers are increasingly acknowledging young buyers’ requirements, and are offering innovative payment plans along with lower down-payment options.”
Young national citizens in the UAE also benefit from national housing loans and help schemes that facilitate their entry into property at an earlier age, Bulchandani added. They added:"Both resident and non-resident citizens have access to bank loans in the UAE – "with financing alternatives devoted to expats and overseas investors".
Understanding costs
Purchasing a home in Dubai is still within the means of young professionals, so long as you are informed about initial costs, mortgage requirement and payment plans.
The first 26 per cent is the crucial commitment making long-term ownership more possible, as Mandhani put it.
Comments