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There are several special concepts in the UAE real estate industry that may confuse foreign buyers. These terms are related to the legislation and restrictions on the right to own property for foreign citizens. So, for example, foreign nationals can purchase real estate in Dubai and Abu Dhabi only in special zones, the terms of rental housing may vary, and a special document will be required to rent out real estate. In this article, we will talk about the most important concepts that foreign investors must deal with when they purchase real estate in the United Arab Emirates.
Content:
The main types of property rights
In the UAE, civil and real estate transactions are regulated by the UAE Civil Code, in particular, Law No. 5 of 1985. The protection of private property is also enshrined in the UAE Constitution, and immovable real estate ownership laws can be adopted by seven emirates independently of each other. Each region has freehold zones. They can also issue their regulations and laws.
Next, we will discuss the main types of property rights that foreign citizens need to know about before buying an apartment in Dubai or another emirate.
Leasehold
A leasehold is the ownership of real estate, limited in time. Conditionally, this form of ownership can be called a long-term lease, however, unlike leasing in the usual sense, it is not a few months or years but decades. In the UAE, a leasehold property can be in the conditional ownership of the buyer-lessee for up to 99 years. At the same time, this property can be modified and changed by making repairs, redevelopment, rebuilding, etc.
Important! This type of real estate ownership is available only to citizens of the Persian Gulf countries.
Freehold
Freehold is a form of exclusive real estate ownership. Unlike the leasehold form, freehold is created for foreign citizens who want to live and conduct business in the United Arab Emirates. The buyer can use the property as a permanent residence or source of income (by renting). In other words, the owner can do whatever they want with the property, including donation, bequest or resale.
One of the main advantages of freehold zones for foreigners is the opportunity to obtain a resident visa for the purchase of real estate for AED 750,000 or more ($204,000, ¥1.3 million).
Condition: to obtain a residence permit, you must purchase a property in a freehold zone. For example, there are 79 freehold zones in Dubai, and 17 in Abu Dhabi.
Musataha
Musataha is a special form of contract that gives the right to use and develop a plot of land and receive profit from it for a limited period. The time limit of using the land plot is 50 years, but, if necessary, this can be extended. This form of real estate ownership is most common in Abu Dhabi.
For example, a developer who has entered into a contract with Musalaha can build a new building in Dubai or Abu Dhabi in specific areas. Moreover, all the properties on this site belong to the developer, and they can dispose of them at their discretion.
Usufruct
Usufruct is another term that is useful for a novice investor or buyer of real estate in the UAE to know about. Usufruct largely means the same thing as a leasehold: this real estate ownership is limited in time (no more than 99 years). However, unlike a leasehold, usufruct does not allow changes to the facade of the property.
Ejari system
If you want to earn income from renting real estate, you should familiarize yourself with another term that is associated with lease agreements. Ejari is a system to regulate the relationship between tenants and landlords in Dubai. The platform was launched in 2007 as an initiative of the Real Estate Regulatory Agency (RERA).
According to Law No. 26 of 2007, all lease agreements are subject to online registration through the Ejari system, which was introduced to protect the interests of tenants and landlords.
Land rights
One could be mistaken for assuming that buying a house in freehold areas does not give a foreigner rights to the land on which their house is located. That is not the case. It does not matter whether you buy a villa, a townhouse, or an apartment, if your property is in a freehold area, you also become the owner of this land.
There are 4 types of land ownership in the UAE:
- There is absolute land ownership in the Gulf Cooperation Council (GCC) countries, including the UAE. This type of land ownership is only available to citizens of these countries.
- A leasehold is spread over the territories of GCC countries for a period of one to 99 years. This type of land ownership is available to citizens of all nationalities.
- Citizens of all nationalities can use freehold areas.
- All foreign citizens can use the territory of free economic zones (Freezone) to own a plot of land.
The rights to land plots in Dubai are regulated by Article 8 of the Emirate's Guide Law of 2010, in Abu Dhabi – Article 61 of Law No. 3 of 2015.
Affordable freehold real estate
Many foreign buyers and investors are convinced that freehold properties are more expensive than leasehold real estate. This is not exactly true: it’s all about the demand for prime location. For example, there are areas in Dubai popular with foreign investors, such as along the coast and in prestigious areas of the city (which contributes to the price increase). The status of the plot of land with the building does not affect its value.
Emirates.Estate specialists will help you buy a house in Dubai, organize a safe transaction with the homeowner, and answer all your questions.
