14 November, 2011

Investing in UAE property: mistakes to avoid

Investing in UAE property: mistakes to avoid

The number one mistake made by UAE property investors during the boom times of a few years ago was to believe that nothing could go wrong.  This belief was shared by property developers who built (or planned to build) as if the golden years would stretch on and on. 

Hindsight is a great thing and we all know now what happened.

During the boom, many investors failed to understand, or sometimes even read their contracts.   Reservation forms were signed without firm contracts in place and buyers were pushed into signing on dotted lines ‘in case they missed out due to the extremely high demand’.  As a result, lawyers have been presented with the near impossible task of recovering a client’s money when an agreement is clearly in the favour of the developer. 

The most important lesson to be learnt from the painful fallout which followed the financial crisis is to conduct due diligence before making a decision to invest.  Purchasing a property is a multi-faceted process and in order to make a sound investment, all angles must be examined in advance.  This includes the choice of property, developer, real estate broker, payment terms and terms and conditions of the underlying contract.

Some simple rules to follow:

1)    Conduct a thorough physical inspection of the property and consider hiring a surveyor to provide an expert view & educated opinion.

Chartered Surveyors, preferably RICS approved, can give a more precise figure of the value of a property, whether completed or uncompleted, than an estimated market price.

2)    Confirm with Dubai’s Land Department that the developer and the project are properly registered.

3)    Check that the payment terms for the property also comply with the laws. This includes purchase price and any other property related payments, such as maintenance and registration fees. 

4)    Investors should also be careful about the type of real estate agents they chose to work with and confirm that all payments are being transferred to the property owner and that all documents are signed prior to money changing hands.   Only work with RERA approved agents.

Other mistakes to avoid:

Blindly trusting the fact that a developer and the project are registered with Dubai’s Real Estate Regulatory Agency (RERA). Registration does give you some peace of mind but it does not guarantee the developer or the project is financially sound. Keep in mind that RERA is a regulator, prescribes certain laws and ethics for market players to follow, but it is not a guarantor.   Do your own research on a project and or/company before you commit.


 
 

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