The UAE is one of the world’s top places to own real estate. However, there are certain conditions that one should know before going for a top-notch real estate investment. It’s true that the returns are very promising but it’s also a fact that you can’t get a property everywhere. At least, not forever. A lot of people don’t know much about the leasehold and freehold zones in the UAE. There are different areas in the UAE and all of them have different laws regarding real estate. If you don’t know about them right now, don’t worry. For all those people who’re missing out on the opportunity, read on to know how to buy property in UAE.
Firstly, let’s take a look at some of the most important laws of different regions.
Buying Properties in Abu Dhabi:
There are zones in the UAE where you can buy a property or lease property in. The ones that you can buy property in are called the freehold zones. These are limited and designated areas selected by the UAE councils to allow foreign investments. For example, there are nine places in Abu Dhabi that foreigners can own real estate in. These are:
- Yas Island
- Al Raha Beach
- Sayh Al Sedairah
- Al Reef
- Masdar City.
Abu Dhabi is a great place that offers amazing real estate investment opportunities. Although you might not be able to own any land, you can buy properties built on the land. According to Law number 19 of 2005, expatriates can not own land but can own properties. These properties can be in the form of floors and apartments. Furthermore, there are 4 detailed systems according to which any expatriate can own properties.
Property System / Ownership:
Ownership of the property still doesn’t mean you get the rights to the land. You can get the ownership of anything built on that land for a period extending up to 99 years. This means you can do almost anything about the properties and completely dispose of them if you wish. However, you can’t do anything about the land since it’s not yours.
Flattening System / Musataha:
Another system of ownership that an Emirati property owner can transfer ownership through is Musataha. A Musataha agreement is an arrangement between two parties hoping to process a real estate transaction. The article 1353 of the UAE Civil Code confirms that the rights of the property are with the Musateh. The Musateh is the person who gets the ownership of the property and can, therefore, rent it out as well. The owner can construct howsoever they wish to on that piece of land. Furthermore, they can mortgage, sell, or even invest in using Musataha agreements. All this is applicable so long as nothing goes against any resolutions of the Executive Council in Abu Dhabi. Although the term for Musataha is 50 years, it is renewable on the consensus of both parties.
Usage System / Usufruct:
Another system of ownership of properties in the UAE for expatriates is the Usufruct system. According to Article 1333 of the Civil Code, Usufruct is a right that allows the usufructuary to have the property. However, the law also states that they can have the property for a term of 99 years and must return it. Furthermore, the law also states that the Usufructuary can’t change the original condition of the property. That means that unlike the Musataha system that allows you to reconstruct the property, Usufruct requires that property returns unchanged.
Although the Dubai Land Department and Abu Dhabi Municipality recognize both, long-term and short-term leases. However, long-term leases refer to the leasing that gives the right to use the property and occupy the property. While short-term leases are monthly rental agreements that can go up to 6 months, anything higher comes under long-term leases. Furthermore, with short-term leases, you can get the property with the furnishings and fittings. Whereas, with long-term leases, you get the chance to customize everything according to what you want.
Long-term lease contracts are only valid if RERA recognizes them. The process of making a tenancy contract and renewing it from time to time is simple. You can have a real estate agent draft it up for you and explain the whole process as well.
Who Can Get A Property?
In Abu Dhabi, according to Article 3(i): Those who are either:
- Emirati Nationals
- Public holding companies that have at least 51% Emirati ownership and 49% of non-nationals
- If the Abu Dhabi Crown Prince or President of the Executive Council decides to give someone property.
Additionally, Article 3(ii) states that foreign individuals have the right to own and acquire properties in investment areas.
Buying Properties in Dubai:
Expatriates can invest in real estate in Dubai following similar rules as stated above with some differences. In Dubai, you can buy a property in one of the freehold zones. In the leasehold zones, you can get long-term leases for up to 99 years as stated above similar to the Musataha agreement. Freehold ownership means you get complete ownership of the land and the property on it as well. Therefore, you can sell, lease, and occupy any freehold apartment, villa, house, or flat in Dubai as per your wish.
Freehold Zones in Dubai:
Some famous freehold zones in Dubai are:
- Dubai Marina
- Downtown Dubai
- International City
- Jumeirah Village Circle
- Palm Jumeirah
- Jumeirah Lake Towers
- Dubai Silicon Oasis
- Business Bay
- Dubai Sports City
- Arabian Ranches 1 & 2
- Palm Jumeirah
- The Villa
- The Springs
- Emirates Hill
- Damac Hills
- The Meadows
Ownership in Freehold Zones:
Article 3 of Regulation Number 3 of 2006 determines real estate areas for ownership by non-nationals. There are 23 areas in Dubai that are designated freehold zones. That means you can buy any property for sale in Dubai available in these areas and own them completely. You can buy off-plan properties from developers with discounts and offers or a completed property from an owner. The Dubai Land Department will check every part of the transaction and contract agreements. They are the ones who will issue the title deed as well. Another interesting thing to know about real estate ownership law in Dubai is that there is no age limit. Literally anyone can own a property in Dubai.
The same rules and term periods are allowed for leasehold properties in Dubai. You can’t own the land but you can own the property on the land. The term can be a maximum of 99 years and you’ll have to renew it after negotiating with the owner. Virtually any area in Dubai that is not a freehold area automatically becomes a lease-hold area. Make sure to check in with a RERA (Real Estate Regulatory Authority) certified real estate agent.
Buying Properties in Sharjah:
Sharjah doesn’t allow full ownership of the land itself but it does allow the Usufruct right to foreigners. Similarly, companies that are owned by foreign nationals don’t have the right to own properties in Sharjah. However, the Usufruct period can be 100 years with renewal possibilities. All the party has to do is register themselves with the Sharjah Real Estate Registration Department (SRERD).
Who Can Get a Property?
According to Article 4 of Registration Law, there are two cases that allow foreigners to own property in Sharjah.
- The Ruler of the Emirate agrees to give property-owning rights to the individual and/or company.
- If the owner has a first-degree relative that inherits the property from the owner or if the owner waivers it to a first-degree relative.
Requirements for Usufruct Rights:
There are a few requirements under Article 3 of the New Resolution that asks for:
- The Usufruct period shall be for a maximum period of (100) hundred years.
- The licensed developer owns the project plot on a freehold basis.
- Licensed developers will need to register the project with the SRERD before they can market the property. This is under the laws of the Usufruct system that also includes selling the rights over the vacant plots.
- The licensed developer shall furnish to SRERD a bank guarantee from a UAE bank equal to 20% of the value of the project prior to the sales of usufruct rights over vacant plots in accordance with the usufruct system.
- 20% of the property value as a bank guarantee will be necessary before getting Usufruct rights. The developer will need to present this to the SRERD as per the Usufruct system laws.
- SRERD will present a commitment form that will have the details of the rules and conditions of the Usufruct system. Licensed developers will have to sign that in order to get the rights.
Although these are the necessary details you should know about owning properties in the UAE. It is in your best interest to hire professional real estate agents who can guide you throughout the process.