With the Abu Dhabi property market pretty much still in its infancy the legal and financial framework is evolving on an ongoing basis. We attend regular industry forums, our bankers and lawyers to ensure that our staff has the latest information available to them.
Legal
In many parts of the world it is usual practice to enlist the services of a lawyer when purchasing a property but this is not normally the case in Abu Dhabi. Contracts are drawn up by the developers themselves and money is usually directed straight to the developer or through the agents' own clients' account. If a client wishes to seek advice on their purchase, Orange Real Estate can recommend a local law practice that has worked closely with our clients in the past.
Financial
Properties are paid for by a series of payments spread over the construction period. Payment schedules tend to be quite evenly spread requiring the majority of the purchase price to be paid before completion. All developments vary but typically the purchaser would be required to put down a 10 to 15% booking deposit followed by 10 to 15% every 3 months or even up to 20% installments in some cases.
If you are buying a property of Abu Dhabi's expanding 'secondary sale' market then you could be required to pay a 'premium'. The premium represents the profit on the original sale price. Properties could have changed owners more than once so the premium being asked for may only represent a small profit for the previous owner. It is important not to get too hung up on 'premiums', rather you should look at the price per square meter or foot, the location and facilities.
Lending
The mortgage market in the UAE is still very young and most banks will still look at the Original Price when calculating the level of lending available to an individual. For residents of the UAE, 80% is achievable and 70% for non-residents. The market has evolved over the last 12 months and lending has improved to take account of Premiums. For example, on a completed villa where the Original Price was 1m AED and the re-sale value is now 1.3m AED, the bank will not only lend 70% of the Original Price but will lend on a proportion of the Premium as well, subject to valuation. When applying for lending on a property during construction, the bank will tend only to lend on the Original Price and not the Market Price.
The private developers are generally tied to one lender and offer a set percentage loan. Some private developers offer no lending at all which must be considered for re-sale.
This market will become more competitive (currently 13 lenders in the market including four international banks - Standard chartered, HSBC, Llyods TSB and Barclays Bank.) and improve as more properties come to completion and will be a contributory factor to continuing price rises.
We have built close working relationships with Banks and mortgage advisors in Abu Dhabi and will be pleased to introduce you to these companies to assist with your purchase.
