Real estate & buying property in Dubai

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The Dubai News (Issue #12)
  Dubai City Information Site
Real Estate & Buying Property in Dubai
 

Hi, as promised
here I am with more on real estate and buying property in
Dubai.


This is something I have been contemplating for way too long. So
long that I have seen properties go up 40-60% before my eyes and here I am
still eating peanuts and contemplating.  I
also saw property values crash and I am still eating peanuts.


I just can't get to do it. The fundamentals of real estate
investing that I've learned just don't support it. Further, I am a value
investor and not so much have the appetite of a speculative investor. All that
said, buying property in
Dubai
can be extremely lucrative!


You are most likely aware of a small place called
Manhattan? Often referred to as
New York City as well.
This place has never experienced a decline in real estate. Maybe
Dubai is headed the same
direction? That is what happens when land is very scarce.


Until just recently, buying property in
Dubai
was only available to local
Dubai
Nationals/citizens. However, properties in
Dubai that are in designated freehold areas
are now available for foreigners to purchase.


Investing in a
Dubai
property comes with a spectacular bonus. The bonus of aDubai resident visa. This is no joke my
friend. Until this was possible, the only way to live in
Dubai was if you were employed. Now you can
buy yourself a ticket to live in what is a paradise to some people by simply purchasing
a property for sale in
Dubai.


Dubai real estate is just booming by the day, and buying property
in Dubai offers "affordable" (can be depending on where you buy) luxury living
in a tax free environment all in a city that is moving faster and further than
any other city in the world.


A Little
Dubai Real Estate History
& Evolution



Dubai has always been a hot market for luxury property in the past few
years in the
Middle East.
Dubai
is the most populated and second largest Emirate of the
United Arab Emirates
("UAE") union. The City has experienced enormous construction and has attracted
several real estates projects from all around the world.


Some of the larger projects in
Dubai
include 
Dubai
Marina,
Dubai Waterfront,
BusinessBay, Dubailand and The Burj Dubai Complex as well as offshore man-made
properties such as the 
Palm
Islands and The
World.


Most property development in
Dubai
today feature innovative and ultra-modern architecture. It is known that
Dubai has brought in the
brightest architectural minds from all over the world to design its projects.
That is partly the reason why each building in
Dubai looks so unique and different from the
other.


In just a few years,
Dubai now has skyscrapers
such as
EmiratesTowers and theBurj al Arab. The Burj al-Arab is located
on a man-made island right on the Persian Gulf off the
shore of
Dubai
mainland. The Burj al-Arab is currently the tallest hotel in the world (as of
2007).



Dubai's prime developer is working on another tall structure that may
be the tallest structure in the world once completed. The final height of the
skyscraper has not been disclosed (a big surprise) and is expected to be
completed sometime in 2008.


Though when I was there early in 2008, people were saying that it
has been pushed back to 2009. It looked VERY tall as it is when I was there.
This very tall skyscraper will be called the Burj Dubai (
Tower of
Dubai).
The same developer is also building the world's largest shopping mall called
the Dubai Mall.


Another notable development in
Dubai
is the
BusinessBay that will be home to five hundred
skyscrapers. All these buildings will be built on land that was lifted from theDubai Creek. Given all that is happening,
buying property in
Dubai
now can prove lucrative form a market appreciation stand point.


Buying
Property in Dubai Can be Legally Challenging


March 12, 2006 was
a historical day in
Dubai
as the government announced the designation of certain freehold zones where
foreigners are allowed to invest. This has made buying property in
Dubai possible for
foreigners without having to go through any partnership agreements with local
Nationals.



 


This increased the
demand for
Dubai real estate overnight as
investors (who were aware of
Dubai
of course) flocked to the region to secure "good buys". There is just way too
much demand till today (2008) and hence the property values in
Dubai have and still are sky-rocketing.



 


There is enough
demand that most new developments sell out (at least on paper) before they are
even fully completed. It has truly been an amazing and historical run for
Dubai since the
announcement was made.



 


With the new laws
in place, foreigners can apply for property ownership with their developer. The
developers have to submit a no-objections letter indicating that all payments
for the property have been made in full. The land will be registered to the
purchasing party after the letter is released.


Three
Kinds of Property Ownership in
Dubai


The law further
states that there are three ways to own a property: freehold, usufruct, and
common hold. In a freehold property purchase, the owner will have complete
ownership rights to the property. The building will be in the owner's name.



 


In a "usufruct" or
long-term lease agreement, the law defines 'usufruct' as the right to use
another's property short of destruction or waste of its substance. The right of
usufruct, as per the law, should not be for less than five years. It is
basically a long term lease negotiated between the tenant and landlord.



 


The final proposed
property ownership is through "common hold". It allows leaseholders to obtain a
share of the freehold by negotiating with the landlord.


Why The
Reluctance in Buying Property in
Dubai?


If all is green and
on the up and up, then why is there reluctance buying property in
Dubai? The answer depends
on the person involved in making the decision. Our feelings, risk averseness
(appetite for risk taking), disposable cash, perceptions and experiences all
play a big factor.



 


Let me share with
you an interesting story. I was talking to
Kish's
dad when I was in
Dubai
in 2007 about the villa he lives in. In 2005 I believe his company gave him the
opportunity to purchase the villa.



 


This was before the
freehold laws. But see his villa is in Jumeirah, a prime exclusive beach area
that does not fall in the freehold zone. This would have been a home run in my
opinion.


Anyway, the
agreement would have made him the owner but on paper the property had to be
owned by his company, which itself was owned by a local National. Now despite
Kish's dad owning shares
in the company as the CEO and Managing Director, he didn't think it was a smart
move.



 


Back then the
asking prices was approximately $150,000 (converted from Dirhams). When I was
talking to him in 2007, he said the latest valuation was $1.5 million. My jaw
literally dropped. You know what though? As much as it sucks to hear that, he
stuck with his original decision and said he would do the same had he had to do
it again.



 


Me on the other
hand would have totally gotten in on the deal. Neither one of us is right or
wrong. It just comes down to the person making the decision just like I said.


I personally know
many investors who have literally made a killing in the last 2 years flipping
up to 10 properties in
Dubai
for handsome profits. I am sure I will come to know of some losers as well if
and when it happens.



 


See properties in
Dubai are increasing so much in value so quick that many feel that there is an
over supply of real estate (it appears to the eyes yet the government says they
are all oversold). Many advocates of the
Dubai
real estate say there is still money to be made in the next 2-3 years and that
no bubble will burst until then.



 


Well, if only you
knew right? Did anyone see the real estate explosion coming here in the
US back in 2006
or 2007? I don't think so. These things are just not for us to predict (my
opinion only).



 


The increased
tourism and a growing immigrant population in
Dubai
will meet the demand that investors need to benefit from their
Dubai
property according to the
Dubai
real estate advocates. Well the expats have to shell out money to buy them too
right? And if they are rapidly rising in value so that they are overpriced,
would any expat just buy them? Not sure. Maybe?



 


Many advocates,
including
Dubai's
government has banked on the tourism industry to attract foreign tourists and
hopefully get them to invest in the real estate.
Dubai
is also working on building a cultural environment through the construction of
the
DubaiCulturalVillage.


The Village will
cater to people from all different backgrounds to make the place feel more like
home. It will include performing arts centers, art museums, libraries, schools
for music, dance and bookstores. There will also be numerous theaters that will
strictly show foreign films.



 



Dubai is really trying to become one of the
premier locations to own luxurious overseas property and they are doing a
wonderful job. They have made The City very attractive with skyscrapers all
over the place and man-made jaw dropping islands to awe anyone.



Dubai is building a dream (some say they are
living in it) and they want to make the world a part of it as much as possible.
The vision is definitely one of forward progress by luring in people from all
over the world.



 


And as attractive
as it is in theory, one must weigh out all the pros and cons before making any
decision. I am not just referring to buying property in
Dubai, but rather life in general. Decisions
about
Dubai are
no different.



 


If you are looking
for a practical resource that can guide you in buying property in
Dubai, I recommend the Dubai
Secrets
 guide. This is by far the most comprehensive and practical guide I
have read. Lots of insider tips and free regular updates on available property
investments in
Dubai. 


 
= = = = = =
 
In the next newsletter I will
write about investing in
Dubai,
a very popular option (in good times or bad) for expats from all around the
world. Don't forget to tell us what you are interested in so we can bring you
ONLY the latest and greatest information that you are MOST interested in.

Take
care and see you soon...


 


~Sunil










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