Why buying a house in Dubai is better than living on rent

Benign interest rates and corrected real estate prices are perfect reasons why you should consider investing in your own home now.

Let's just get straight to some facts. Almost 68 per cent of the home loans in the UAE are available at 4 per cent per annum or less, as per a recent study by Souqalmal.com, an online personal finance portal.

Secondly, the yields on properties in Dubai, in particular, are pretty attractive. Rents on residential properties haven't fallen in the same proportion as the property value. In 2015, home prices in Dubai fell 15 to 20 per cent as transaction volumes halved. The rents, on the other hand, are down by three per cent only during the same period. As per industry experts, yields for small and large apartments in Dubai range between 5.87 per cent to 7.21 per cent, which is comparatively higher than popular property investment destinations such as London, Hong Kong and Singapore.

Where to buy?

Well that fundamentally depends on your budget. There are a number of ways in which you can hunt for a property that suits your pocket. You can either rope in a real estate agent to give you a better idea on the property that suits your bill, and your needs, or you can indulge in some self-research on the world wide web. There are websites aplenty that give you a fair idea of the property prices in the UAE. Some of the popular ones include Dubizzle, justproperty.com, propertyfinder.ae, etc.

These websites have congregated data from buyers' and renters' perspective. You can check property prices as well as rentals, if the idea is to give the purchased property on rent and earn.

How to buy?

Getting home finance from banks in the UAE is not a difficult task if you have a constant stream of income and limited liabilities. As per the revised laws you have to make a down payment of 20 per cent, in case of first home, and banks can finance the rest. In case of a second or third purchase, expatriates have to pay at least half of the property value as down payment, and the bank can finance the rest.

Abu Dhabi Islamic Bank (ADIB) and Union National Bank (UNB), for instance, offer finance at competitive rates.

Ancillary costs

Besides the down payment and finance provided by the bank, there are certain ancillary charges too that need to be kept in mind. For example, Land Department charges a fee for registration; real estate agent charges commission for the sale; maintenance charge for the building, which is usually in case of apartments and is paid annually; and insurance premium levied by the bank against the home loan.

All in all, back of the envelope calculations suggest that you should have at least 35 per cent of the total value of the house as cash before you make the first move.

Reverse equity

Now let's turn the tables. If you already have a house and wish to unlock its equity without vacating it, then reverse mortgage is the solution. Occupants get a constant stream of income and also get to live in their cherished house. ADIB offers this facility to its customers.

There's merit in investing in a home. Arguably, this saves a lot of money that would have otherwise made it to the coffers of the landlord or landlady, and also create a nest egg for retirement. If in about 10 or 20 years you plan to move to greener pastures to spend your sunset years in mountains, or by the beach, the value of your house would supplement your income and allow for a happier and financially stress-free retirement.

- suneeti@khaleejtimes.com