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Tips for purchasing off-plan property in Dubai

Tips for purchasing off-plan property in Dubai

August 2016

By Philip Corfield-Smith

Purchasing off-plan property remains a popular investment option in Dubai’s housing market. Whilst the essentials of purchasing property are similar across different markets, the availability of information regarding ownership of property in Dubai is more restricted than in other developed jurisdictions where, for example, public records are readily available for inspection. Therefore, greater emphasis is placed in Dubai on instructing counsel to ensure the steps that are available are in fact undertaken.

For the sake of ease, we have set out the key steps for expats to consider when purchasing off-plan property in Dubai into categories. It should be noted that this is not meant to be an exhaustive list and independent legal advice should be sought in respect of not only the acquisition process, but also in respect of verifying and negotiating the sale documents.

Developer Due Diligence

  • verify that the developer is registered with the Dubai Land Department (DLD) and is authorised to sell off-plan property – this can be verified in the “Approved Developers” section of the DLD website: (http://www.dubailand.gov.ae/English/Pages/Approved-Developers.aspx);
  • confirm the track record and reputation of the developer in terms of project delivery on the basis of, for example, previously completed projects;
  • examine any press coverage or publicly known information about the developer’s current status – for example, is it involved in any dispute regarding the delivery of a project?

Project Due Diligence

  • confirm the project is located in a designated freehold area granting ownership rights to non-UAE/GCC nationals – these areas are set out in Regulation No. 3 of 2006 Determining Areas for Ownership by Non-UAE Nationals of Real Property in the Emirate of Dubai, as amended;
  • verify that the project is registered with the DLD for off-plan sales and current construction status – this can be verified in the “Project Status Tracking Service” section of the DLD website: (http://www.dubailand.gov.ae/English/Pages/Project-Indicator.aspx);
  • confirm the Escrow account details provided to you by the developer are the project’s official Escrow account details registered with the DLD – this can be verified in the “Approved Developers” section of the DLD website: (http://www.dubailand.gov.ae/English/Pages/Approved-Developers.aspx);
  • assess the location of the project in terms of convenience and accessibility – for example, if the project is located in the suburbs of Dubai and has little else around it, this may impact the relevant authority’s ability to deliver hard infrastructure.

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Title and Use Due Diligence

  • verify that the developer/seller (in the event of an acquisition in the secondary market) is the registered owner of the property by requesting and viewing the title deed to the property;
  • confirm what use/land restrictions, if any, exist in relation to the property – for example, any encumbrances, restrictions on renting/onsale, or rules and regulations governing the property by way of the master community declaration;
  • verify what rights are being granted in relation to the use of the property, for example, the permitted use of the plot (retail/residential), the allocated gross floor area of the plot and/or the capacity of utility services and whether these are sufficient for the purpose for which the purchaser is acquiring the property;
  • it should be kept in mind that ownership of a property is confirmed upon issuance of the title deed – prior to that, the purchaser will only have a contractual right.

Sale and Purchase Agreement

  • review what rights will be granted to the purchaser and what obligations the purchaser will be required to fulfil;
  • confirm the construction obligations of the developer, specifically, the timeframe/specifications for delivery and defect rectification obligations;
  • confirm the forum for any disputes between the purchaser and the developer in relation to the property has been designated as “Dubai, United Arab Emirates”;
  • review the rules and regulations in relation to the on-going management of the property and the master community in which it is located – for example, there will normally be an obligation on the purchaser to pay service charges to the developer/master developer.

Registration and DLD Fees

  • DLD registration fees currently assessed at 4% of the purchase price, although will vary in the event that the right granted is not an ownership right in perpetuity (freehold interest);
  • until the property is completed, it is mandatory to register the property on the Interim Property Register (Oqood) and the purchaser should ensure that the developer provides them with the Oqood certificate;
  • once the property is completed and the property is registered on the Real Property Register, the title deed which will be issued should set out the particulars of the purchased property and the sale transaction;
  • it should be kept in mind that the valuation of the land as determined by the DLD may vary from the purchase price of the property provided by the developer, which in turn may result in the purchaser having to pay the difference as part of the registration process

Disclaimer: The above is a general guide; professional advice must be sought prior to embarking on a property purchase in the Emirate of Dubai.

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About the author:

Philip Corfield-Smith is Partner and head of Real Estate at Pinsent Masons. Headquartered in London, the firm has a network of nine offices in the UK as well as six offices in Asia Pacific, two offices based in the Middle East (Doha and Dubai), and four offices in mainland Europe. Pinsent Masons employs over 2,900 people including over 1,500 lawyers. It has over 400 partners globally.

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