During recent periods, it has been seen that with the rise in prices of renters in Dubai, numerous individuals, especially young people, look to purchase property, considering it to be the most viable solution compared to paying hefty rents. On one hand, it has been analyzed that entering the property market in Dubai does not involve just securing a mortgage loan, but one must be financially prepared to pay a huge portion of expenses in cash, which was not considered by numerous individuals, according to experts in real property transactions, even with new off-plan purchase schemes introduced in the recent property market.
Market analyses indicate that, on average, buyers require 25% to 30% of the value of the property in cash to kick-start the process of home-buying in Dubai. The amount in question is not constrained by the mortgage down payment; it includes a range of additional associated costs.
The down payment, claims Ismail Al Hammadi, CEO, IAH Group, varies between 20% of the property value in relation to foreign buyers, while it is around 15% in relation to UAE nationals. Even so, this is not enough, and other additional expenses must be taken into consideration.
If a residential unit is valued at AED 1 million, the buyer would need approximately AED 250,000 in cash to enter the transaction with ease. This would cover the down payment and ancillary costs, reflecting the decisive role of initial readiness in property purchases.
Even with the relative decline in interest rates and when the mortgage repayment periods were extended to a maximum of 25 years, there are some costs that bank financing under no circumstances covers and have to be paid in cash.
According to Navneet Mandhani, who is the founder of Karma Developers, one of the major costs that cannot be financed using a mortgage includes the 4% Dubai Land Department fee and 2% real estate agent commission that are part of Dubai property market costs. This can be stated as one of the major challenges facing new generations of property buyers.
Getting a mortgage, however, is not an easy task for the younger population. Banks apply stringent criteria to test the income level, stability of the employee, and even the credit record of the individual.
Yogesh Bulchandani, CEO at Sunrise Capital, thinks that there may be delays or even rejection for young buyers at early steps in the mortgage application process due to poor credit or unstable income levels; nonetheless, with heightened financial literacy and better borrowing facilities in the last few years, things have been made a bit easier for homebuyers.
Dubai property development companies, in an attempt to alleviate the costs of initial outlays, are now opting for flexible yet innovative payment schemes, which specifically target first-time buyers. They cater specifically to young buyers.
At present, the commonly used means of payment are:
Experts have explained that this diversity in payment options is one of the primary reasons for this increase in demand with young buyers.
Furthermore, certain segments of the consumers like the UAE nationals are provided with higher levels of support by the national housing schemes, which enable them to purchase houses even at a younger age. At the same time, the expatriate consumers would be able to access the banking facility provided to foreign investors.
Despite the fact that buying a house in Dubai is still open to young and first-time homebuyers, it is of major importance to have the finances in the right sense. In many ways, it is important to have the required cash capital, but in other ways it is also important to be aware of the costs not being covered by the mortgage. In the final analysis, having 26% of the value of the house as the required capital is the single, most important requirement.
Source: https://www.khaleejtimes.com
