Bahrain offers foreigners the chance to buy property in specific freehold areas, featuring luxury homes, many amenities and attractive rental yields.
Thinking of your dream beachfront villa in a sunny paradise? There's one country in the Arabian Gulf that's a no-brainer here. Bahrain provides opportunities for foreigners to invest in real estate and live a life full of luxury. But is this possible? This detailed guide will take it a step further by showing how it works when investing in a property in Bahrain as an international investor. Learn whether it is possible to make your dream come true, and what benefits and challenges you may face on the way.
CAN A FOREIGNER BUY A HOUSE IN BAHRAIN?
Foreigners can buy a house in Bahrain but only in specific freehold zones. The Government of Bahrain, since 2001, has opened up select areas for international buyers to own freehold properties. However, there are restrictions. Most of the areas where foreigners can buy property are high-end developments, often on reclaimed land from the sea. These areas include:
Amwaj Islands:
Amway Islands is a designated investment project and one of the artificial islands in Bahrain. It's recognised for island living, water-front properties, marinas, and leisure facilities. It is a popular location favoured by those who crave a lavish lifestyle with a wide range of amenities.
Durrat Al-Bahrain:
Like Amwaj islands, Durrat Al-Bahrain is also an artificial island with beachfront living. It comes complete with a golf course and a marina. It, too, is in high demand for foreign buyers, much like the Amwaj Islands, offering a life of luxury.
Hoora:
Hoora is a residential area that is one of the most favoured areas in Bahrain by expats. From apartments to villas, it includes a variety of different housing options.
Juffair:
Juffair is a popular area for expats and international investors with many an abundance of restaurants and a thriving nightlife scene.
Reef Island:
Reef Islands is a man-made island that features many luxury residential developments. They’re big on waterfront living with many amenities including restaurants, shopping, entertainment, and more.
Seef:
Seef is the most high-profile commercial district in Manama. This place is especially renowned for its many five-star hotels. It also includes lots of shopping centres and office buildings.
These locations often include luxurious villas, beachfront villas, and commercial spaces. They attract investors looking for high rental yields or a premium lifestyle.
BENEFITS OF BUYING PROPERTY IN BAHRAIN AS A FOREIGNER
There are many benefits for foreigners who invest in Bahrain's real estate market. Some of these benefits include:
1. Freehold ownership in designated areas
Foreign property investors in Bahrain can own 100% of a property in freehold zones. This offers full control over the property without needing a local partner.
2. Strong rental yields
Bahrain's real estate market offers great rental returns with gross yields from 8.3% to 11%. So buying real estate in Bahrain is great for international investors who want to rent out their properties.
3. Property market stability
Over the years, Bahrain's real estate market has maintained relative stability. While other GCC countries have experienced fluctuations, consistent growth occurred in Bahrain, making it an appealing market for investors.
4. No property tax
One of the major plus sides is that Bahrain does not have any property tax. Therefore, long-term expenses become less for foreign investors. Still, there is a 10% municipal tax on properties held by foreigners, which we'll discuss later in this article.
5. Residency opportunities
Owning a property worth a minimum of BHD 50,000 in Bahrain means you can apply for a self-sponsorship Bahrain residency visa permit. You can renew the Bahrain residency permit every two to five years. It also allows you to sponsor your spouse and any children below 18 years of age.
DISADVANTAGES OF BUYING PROPERTY IN BAHRAIN AS A FOREIGNER
While there are many benefits to owning property in Bahrain, as with any market there are downsides that foreign buyers should consider:
1. Limited property locations
Foreigners can only allowed to acquire properties in specified areas. These are usually prime areas developed either for high-end living or commercial purposes. So the cost of these properties is often more expensive too. This restriction also reduces the variety of available properties.
2. Municipal tax for foreign owners
Though Bahrain does not have a property tax, foreign buyers must pay a 10% municipal tax on the property's rental value. This applies even if the property is not rented out.
3. Risks in property development
There are always risks with any property development. Property in Bahrain is no different here. The risk of developers defaulting or delays in completion may impact your investment. So it is vital to research properly, choosing established and well-respected developers.
4. Complex legal requirements
Foreign investors need to follow some regulations, such as getting a no-objection certificate (NOC) from the Ministry of Interior. Legal issues like existing liens or disputes on properties can also complicate the buying process.
5. Mortgage challenges
Even though it is possible to get mortgages as a foreigner in Bahrain, the process may be more complicated. Banks may offer interest rates between 5% and 9% for 20-year terms, and some eligibility criteria are stricter for non-nationals.
STEPS WHEN BUYING PROPERTY IN BAHRAIN AS A FOREIGNER
By now you know the pros and cons; let's go through the steps involved in buying property in Bahrain as a foreigner:
1. Choose a freehold property
First, select a property located in one of the designated freehold areas. Also, ensure that the property fits within your budget and meets your investment goals. Whether you're looking for rental returns or a new house, getting the location right is critical.
2. Negotiating and making the right offer
Once you've found a suitable property, you'll need to negotiate the price with the seller. You usually submit a written offer outlining the proposed price, purchase terms, and any conditions.
3. Conduct legal due diligence
Before making any payments, perform a thorough inspection of the property. It's a good idea to hire a lawyer to ensure that the property is free from any legal disputes, liens, or encumbrances.
4. Sign a reservation agreement
After you've agreed on a price, you'll need to sign a reservation agreement. This reserves the property for you until the rest of the process is complete. You are also required to pay a deposit in most cases, usually 10% of the property's price.
5. Obtain legal approval and permits
Foreign buyers must get a non-objection certificate (NOC) from the Ministry of Interior. Your lawyer will be able to guide you through and also assure you about the due completion of all requirements.
6. Close the deal
When everything is in place, you sign the sales agreement. The agreement will outline the final purchase price, payment schedule, and other important details. At this stage, you'll need to pay the remaining balance. After this, the property gets registered in your name.
FEES INVOLVED IN A PROPERTY TRANSACTION IN BAHRAIN
There are several fees that a foreign buyer needs to know when buying property in Bahrain. These include:
1. Registration Fees
When registering a property in Bahrain, you pay a fee to the Survey and Land Registration Bureau. If you make the payment within 60 days, the fee is 1.7% of the property's value. But if delayed, the fee rises to 2%.
2. Municipal Tax
A foreign buyer also pays a 10% municipal tax on the rental value of the property. This tax also applies if the property is not rented.
3. Stamp Duty
Stamp duty in Bahrain is 2% of the property’s value. The buyer pays for this. This fee covers the cost of processing the property transaction.
4. Legal Fees
Hiring a lawyer to help you with the property-buying process is a sensible move. Legal fees vary with the complexity of the transaction. But these fees usually range between 1% and 3% of the purchase price.
5. Real Estate Agent Fees
You will most likely have to pay commissions when working with a real estate agent. This depends on the agent and the property and can range from 1% up to 5% of the price of the property.
6. Service Charges
You may have service charges if you are purchasing an apartment or property that is in a managed block for maintenance of the common areas. These fees usually range from 1% to 2% of the value of your property per year.
CAN YOU BECOME A RESIDENT IN BAHRAIN BY OWNING PROPERTY?
You can become a resident in Bahrain through property ownership. With a self-sponsored residency permit, foreigners who buy a house in Bahrain worth BHD 50,000 or more can apply. This long-term residency visa in Bahrain allows you to live in the country and sponsor your spouse and children too. But this residency is not permanent; you will have to renew it every two to five years. Moreover, owning property in Bahrain does not guarantee citizenship. This is because Bahrain has separate laws for granting citizenship. These generally require long-term residency and meeting other conditions.
KEY CONSIDERATIONS WHEN BUYING PROPERTY IN BAHRAIN AS A FOREIGNER
Before purchasing property in Bahrain, there are a few important considerations you should keep in mind:
1. Seeking Legal Advice and Guidance
Local real estate lawyers can help you understand the laws involved when buying a property in Bahrain. They will also conduct comprehensive due diligence to ensure that the property is not involved in disputes or other issues.
2. Detailed Inspections
Always inspect the property in detail before buying it. You might want to hire professional inspectors here. They can help you identify problems that could cost you lots of money later on.
3. Know the Local Market
Bahrain's property market can differ from real estate markets in other countries. So, consulting with a real estate agent who understands the local Bahraini market can help you find the best property that fits your requirements.
4. Cultural Awareness
In Bahrain, relations with the seller can be critical. Respect for the local customs and politeness during the price negotiation process lead create a much smoother and easier transaction.
IS BUYING PROPERTY IN BAHRAIN A GOOD IDEA FOR FOREIGNERS?
Buying property in Bahrain as a foreigner is a great investment as it is. This attractiveness increases when considering the country's good yields, no tax levied on property, and a stable market. Of course, there are certain restrictions, especially involving what and where foreigners can buy property. The financial costs from registration fees to municipal taxes are also essential considerations.
International buyers should also know that owning a property worth BHD 50,000 or more can help them get a renewable residency permit. This makes Bahrain an attractive option for those looking to invest in both property and a potential new home.
As a whole, detailed research, cautious planning, and advice from a lawyer are crucial for any foreigner buying property in Bahrain. This way you can make sensible decisions that you won't regret and that align with your long-term goals.
Ryan Keeler | Oct 24, 2024
