Hi, Sunil here to talk about 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 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 a Dubai 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, Business Bay, 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 Emirates Towers and the Burj 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 Business Bay that will be home to five hundred skyscrapers. All these buildings will be built on land that was lifted from the Dubai 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 Dubai Cultural Village.

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.