Buying Guide
Abu Dhabi is the capital city of the United Arab Emirates and the richest city in the world. The island city has a 1.6 million population, projected to double by the year 2030. Abu Dhabi is the largest of the seven emirates with 89% of the UAE land mass.
It's spectacular 700 km Arabian Gulf coastline has almost 200 natural offshore islands. The economy has seen spectacular growth rates of 16% cagr over the last 10 years. Spending on infrastructure projects will be in excess of $200 billion in the next 5 years. As the economy thrives, the real estate sector continues to flourish, and the boom has been driven by undersupply and insatiable demand. Abu Dhabi is tipped as one of the world's best real estate markets for investors.
Abu Dhabi Property Law
Before selecting property it is important to check your eligibility to purchase! Abu Dhabi has recently passed an ownership law allowing freehold ownership for foreigners and GCC nationals in certain designated areas called 'investment areas', such as Al Raha Beach, Al Reem Island, Saadiyat Island.
These are similar to the designated Freehold Areas in Dubai. Ownership in all other areas is still restricted to UAE nationals. GCC nationals can own land and buildings in these investment areas on a Freehold basis. Other foreigners can own buildings, floors and apartments in buildings within the investment areas on a freehold basis, but have no freehold ownership rights to the underlying land.
However foreigners can own 99 year leases on already built up land (Usufruct Leases)
or 50 year development leases (Musatahah Leases) which allow lessees to build on
undeveloped land. These leases may be renewed for similar periods upon mutual agreement of the parties. Holders of these leases have full rights of subleasing, assignment, mortgaging without the consent of the landowner, and the landowner may not mortgage the leasehold without the consent of the leaseholder.
Companies can enjoy the same rights in property ownership as UAE citizens. A company wholly owned by UAE nationals can own Freehold anywhere in Abu Dhabi. A company whose shareholders are predominantly UAE nationals, but also has GCC or foreign shareholders may be treated as a GCC or foreign national and property ownership would be restricted accordingly.
Title to real estate is ultimately granted by the ruler, and the registration law provides that any real estate transaction is null and void unless the property has been previously registered with the Abu Dhabi property registry. Therefore its extremely important to check that any property you wish to buy or sell has been registered.
Regulation of Real Estate Markets
Abu Dhabi does not yet have any legislative body regulating Real Estate markets such as
RERA in Dubai or ARRA in Ajman. Agents and Brokers are not yet regulated, nor is the marketing of off-plan property developments and off-shore developers. There is no requirement yet for escrow accounts.
The Buying Process
You should engage a reputable agent or broker with whom to review your requirements, the options, availabilities, prices/costs versus your budget and importantly your eligibility to purchase.
If you require financing, you may at this early stage, apply to banks for pre-approval of funds and also establish your borrowing limits. However you must have a short list of
potential properties, because mortgage financing is only available on certain specific developments.
Once you have selected a property, then the process depends on whether the property is "off-plan" and being purchased direct from a developer or developer's agent, or whether you are buying a "re-sale property" from an individual owner/investor.
If the property is being purchased "off-plan" direct from the developer, you will be asked to complete a reservation form and must submit this to the developer or developer's agent, together with a copy of your passport.
The reservation form will provide details of the property, the developer, the basic terms and conditions of the deal, the payment plan, and buyer's personal details. If purchasing in the name of a company you will have to submit the company documentation at this stage.
You will have to pay a reservation deposit at this time, usually from 5% to 15%. The next stage is the sales and purchase agreement, which is a legal contract setting out in detail all the terms and conditions and agreed payment plan, and committing the buyer and seller to the deal.
You may not receive the sales and purchase agreement until you have paid up to 20%
of the purchase price, and you should ask up front when you will receive it. It's a good idea to ask for a draft copy of this at an early stage in the process so you can check what you are signing up to in advance of signing the reservation form.
It is essential to carefully check all the documentation at every stage in the process, ensuring that all terms and conditions, fees, commissions etc. are as agreed. Ask questions for clarification if in doubt and verify documentation with authorities.
The final stage is the transfer process which involves the transfer of the title deeds from Seller to buyer, and takes place when the property is complete and ready to handover.
This process will normally take place at the Abu Dhabi Land Registry and must be attended by the buyer and seller (in this case the developer).
You will have to pay the final installment of the payment plan to ensure you have paid 100% of the purchase price at time of transfer plus the transfer fees.
You may also have to pay maintenance fees and possibly connection fees for utilities, water, electricity and phone. Note that you should attend in person, however if this is not possible you may appoint someone to act on your behalf by granting them power of attorney.
Normally you will then have the opportunity to inspect the property and make a "snag list" of items which may require attention by the developer.
If you are buying a "re-sale property" ie. from a private owner/investor then the real estate agent will prepare and issue an MOU (Memorandum of Understanding) to both parties. You will have to provide a copy of your passport at this stage. If purchasing in the name of a company you will have to submit the company documentation at this stage.
The real estate agent will co-ordinate and oversee the signing of the MOU by both parties. The MOU does not have the binding power of a contract, but it sets out details of the property, the basic terms and conditions of the deal, the payment plan, and the buyer's and seller's personal details.
It also specifies a cancellation fee payable by either party if they pull out of the deal. The MOU should specify the handover and transfer process including place and date.
The next stage is the transfer process which involves the transfer of the contract from seller to buyer, and normally will be co-ordinated by the real estate agent with the developer at the developer's offices. The developer will in fact issue a new sales and purchase agreement under the new buyer's name.
The buyer will have to pay the required monies as specified in the MOU, the transfer fee and the real estate agent's commission which is usually 2-3%, at the time of transfer.
The transfer fee, usually 2-3% of the original purchase price, is payable to the developer. At the time of transfer, the buyer will have to pay the required monies as specified in the MOU, the transfer fee and the real estate agent's commission which is usually 2-3%.
Note that you should attend in person, however if this is not possible you may appoint someone to act on your behalf by granting them power of attorney.
Again, the final stage is the transfer process which involves the transfer of the title deeds from seller to buyer, and takes place when the property is complete and ready to handover... as detailed above for off-plan property.
If buying ready property, the transfer of title deeds will take place at the Abu Dhabi Land Registry, and the real estate agent will normally co-ordinate this process. You will have to pay 100% of the purchase price at time of transfer plus the agent's commission and transfer fees.
You may also have to pay maintenance fees and possibly connection fees for utilities, water, electricity and phone.
There are no other taxes or fees to pay when you buy, sell or rent property. Normally you will then have the opportunity to inspect the property within a specified time limit and make a "snag list" of items which may require attention by the developer.
Selling Property
You may re-sell your property even before completion, but only after you have paid a certain percentage of the purchase price to the developer, typically 20%, as specified in your sales and purchase agreement. If the property is completed you may sell at any time.
There will be a transfer fee payable to the Abu Dhabi Land Registry, normally 2% of the original purchase price and commission payable to the real estate agent, normally 2% of the selling price. These costs are normally borne by the buyer, but can be subject to negotiation.
There are no other taxes or fees associated with the sale of property.
Mortgages
Mortgage lending options are not yet as developed or competitive in the UAE as internationally. You may only borrow from local UAE lenders and not from international lenders, although if you own assets outside the UAE you may be able to obtain equity release on these assets.
Not all UAE lenders will offer mortgages on all development projects, so you need to check if your intended property is financeable, and you need to get written confirmation of this from your agent/developer.
Mortgages are typically offered on a capital repayment basis and you can obtain funds up to 95% LTV (loan to value) if you are a UAE citizen, or up to 75% for non UAE citizens.
The affordability criteria is typically that your monthly mortgage repayment should be no more than 50% of your net monthly income , after other loans etc are deducted. You will need loan protection insurance, such as life insurance cover to secure the amount of the loan you have received.
Residence Visas
We recommend that you contact the UAE embassy or consulate in your country, as residency permit and visas rules are evolving and change regularly.
At this time, Abu Dhabi does not grant Residence Visas for foreign freehold property buyers. However, if you plan to live in the UAE, you will need a residence visa.
You can obtain a Residence Visas only if you have a job in the UAE, or you own a company in the UAE , in which case you will be sponsored by the company.
Residence Visas are issued by the immigration department and provided to you by your sponsor (the company or person you are working for).
If you are coming to the UAE with family members, you should obtain a family visa, which allows you to sponsor your parents, spouse, daughters, sons under the age of 18.
Family Visas are only possible if you earn more than Dhs. 4,000 (US$ 1,100) a month.
Residence visas are normally issued for 3-years, you will need to take a medical test and obtain a health card. A health card costs around Dhs. 300 (US$ 82) and should be renewed yearly. It can be issued by at Ministry of Health or else at a recognized private hospital.