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Real Estate Investment in UAE - Pros and Cons

  | Published: 12 September 2020 | Last Updated On: 20 January 2021

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Smartest investment and life plans in UAE

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For a lot of people, investment plans in real estate turn out to be unknown territory. Unlike bonds and stock, generally known as traditional assets, until recently real estate was considered to be an alternative asset, which is historically hard top access, repayable, and expensive.

Property is amongst the investment classes, which has faced its ups & downs especially in the UAE; however, with time, it has been proven to be a good bet and a productive asset if properly treated.

Purchasing property can almost reduce your rent to half, offer you with double-digit returns on rent and provide exponential growth in the capital; however, there are some other reasons for purchasing your own house too. Moreover, there are some inevitable risks that real estate agents usually don’t exist.

The advantages and disadvantages of purchasing real estate may differ on whether as a person purchasing the property for living in or in the form of an investment asset.

When you have your own house

Owning your house is usually something inspiring for the people- they say “my own house”. When you have your own house, you can make it your personal space; you can decorate, renovate, and show your own style, personality, and way of living life in a place where you spend the maximum time. You can put effort and time into making it comfortable and special, which is something people don’t generally do with their rental properties.

Always ensure you have insurance for buildings and a yearly maintenance contract with a firm that is reputable.

When you own a house, there are no such cases as landlord increasing your rent amount or asking you to vacate, as it is your place. If you buy wisely, you should be making payments related to banks that are well lower than what you would have been paying as rent.

In case you have a fixed mortgage amount then that same amount will go from your bank account every month (not more than a cheque in advance). That said, in case the rates of interest are increased and the mortgage is not fixed, then the payments will rise (or fall in case the rates reduce). Another con is that you can’t take advantage of reducing rental rates because now the rent gets linked to the rates of interest and not the rental industry.

Having your own house does make the situation somewhat less flexible as compared to when you are renting. It could be more difficult to downgrade, upgrade, or move locality. Although buying and selling property in the Emirates is a pretty fast process. In case you need to leave the Emirates quickly, pass it on to some property manager and put it on rent.

When you buy a property in the form of an investment

When you have a property in the form of an investment in Dubai you have the advantage of all the incomes- passive income. It is a common saying that in case you do not find a way of making money at the time of sleeping; you will end up working till the time you die. If in case you earn a sufficient amount of passive income, you will never have to work for earning money again.

The main advantage of real estate in the form of an asset is that the banks will provide funds against (taking safety over it) for an average person also. The fact that the banks will be lending you to buy an investment asset that lets you purchase a much bigger asset as compared to what you would do otherwise (simply with cash) and hence receive better returns.

The return on rentals, in case you make use of leverage, could provide you high returns on cash, far better than what you would receive from a bank, and much better than most of the other asset types. In case you have cash and are willing to invest, then hands down real estate are one of the best options.

The real estate rates may increase in value. However, what goes up also goes down. The recent slump in real estate has happened due to oversupply and a lack in demand & prices have gone down making people doubtful when it comes to real estate investment plans. The best way for dealing with real estate rates dropping is controlling when to sell and prevent panicking and putting it at the market’s bottom. Make sure that you sell your property only when you wish to and also that you never end up in loss.