Real Estate? What it is and how it works

While everyone has heard about Real Estate, we thought it would be better to talk about its entirety to gain a better perspective of the real estate industry. In this article, we will look at the definition of real estate, what it entails, its types, and how the real estate industry works in Dubai.

What is Real Estate?

In the simplest terms, Real Estate means real or physical property. It includes land and anything fixed/immovable/permanent like buildings, fences, roads, trees, etc attached to it.

Types of Real Estate

Broadly speaking, there are four types of real estate as follows:

  1. Residential Real Estate: This includes houses/apartments, or any structure constructed for residential purposes. It covers properties under construction and resale homes as well.
  2. Commercial Real Estate: This includes offices, hotels, shops, and any such structures used for the purpose of business.
  3. Industrial Real Estate:  In most countries, companies from the manufacturing and warehousing industry are allotted a demarcated area to minimize the effects of their activities on people. This includes production factories, warehouses, research units, etc.
  4. Land: A piece of land without any man-made structures is also considered to be a real estate property. Some examples are farms, orchards, and even barren lands.

How does the Real Estate Industry work?

In the real estate industry, the primary activities are of buying, selling, and leasing property. Financing real estate projects and real estate investing are other aspects which are gaining popularity too. Let’s take a quick look at how the real estate industry works in Dubai.

Buying a Real Estate property

In Dubai, the freehold property market in designated areas authorized by His Highness, the Ruler of the Emirate of Dubai Mohammed bin Rashid al Maktoum allows people of any nationality to purchase a property. This is regardless of whether the buyer is a resident of Dubai or is based overseas. Usually, the purchase transaction is completed within thirty days from the date of signing the agreement. The process is as follows:

  • The buyer and seller finalise the terms.
  • They sign a Memorandum of Understanding (MoU) and the buyer pays a deposit.
  • Both the buyer and seller approach the developer and obtain a No Objection Certificate (NOC) allowing the seller to sell the property. The developer issues the NOC after ensuring that all payments due from the buyer are cleared. Some developers charge a fee for issuing the same.
  • Next, both the parties approach the office of the Dubai Land Development and officially transfer the ownership after fulfilling the formalities. On successfully doing the same, a new title deed is issued in the name of the buyer.
  • In case of a home loan, the bank’s involvement is required.

Buying a Real Estate property

Selling a Real Estate Property

As a seller of a real estate property in Dubai, it is important to ensure that you make your property presentable before making it available for sale. Also, the real estate market in Dubai is volatile. Hence, it is advisable to research the market well to determine the achievable selling price of the property. There are many real estate advisors who can be consulted for the same. There are many websites which cater to the buying and selling of real estate in Dubai. Creating a listing with such sites can help buyers find your property with ease.

Also Read: Why Dubai Real Estate?

Leasing a Real Estate Property

Dubai, being a growing economy, attracts thousands of people to its shores every year for jobs, business, tourism and more. This, inadvertently, fuels the real estate rental market in Dubai. Here is an overview of the leasing process:

  • The landlord researches the market and determines the highest achievable rent in his area, makes his property presentable, and starts marketing it.
  • The tenant comes across the advertisement and contacts the landlord or his agent.
  • After the initial discussion on the phone, the tenant visits the property to see it in person.
  • If he likes it, then he makes an offer or negotiates on the rental amount.
  • Once the landlord and the tenant come to an agreement, the tenant pays a security deposit to secure the unit for himself.
  • The tenant provides the required documents and a contract is signed by both the parties.
  • The tenant needs to submit some documents to DEWA (Dubai Electricity & Water Authority), do an Ejari registration, and submit a move-in form (a requirement with certain developers).

Leasing a Real Estate Property

Investing in Real Estate has many advantages:

  • It is simple to understand and does not require you to work your mind around complex ratios or jargons.
  • You can work on your property and increase its value, unlike stocks or bonds.
  • It provides a natural protection against inflation, as inflation rises, real estate prices increase too.
  • Rental income can work as a great source of secondary income.
  • Loans are easily available to purchase the property. Also, in time of exigencies, you can take a loan against your property at competitive rates.

Buying a property and selling it at a higher price or leasing it for rental income are the traditional ways of investing in real estate, there are many alternative investment options available today. These include real estate Crowdfunding, Real Estate Investment Trusts (REITs), etc.

Summing Up

Real Estate is one of the oldest and most trusted forms of investment in the world. However, it is important to understand the real estate landscape well before buying, selling, leasing, or investing in it.  

Recent Posts

About SmartCrowd

SmartCrowd is MENA’s first and largest regulated Real Estate Investments Platform enabling people to directly invest in attractive investment properties at a fraction of total prices using a crowdfunding model.
Starting From AED 500 ($140)