Dubai, a shining pearl in the sands of the Arabian Peninsula, is renowned for its skyscrapers, luxurious hotels, and endless opportunities. However, behind this glamorous facade lies a complex system of laws and regulations that govern real estate in this metropolis. Real estate rules in Dubai are constantly changing, introducing new opportunities and limitations for local residents and foreign investors.
Let's explore different types of property ownership, rental rights, property buying and selling procedures, as well as current trends and changes in legislation. By familiarizing yourself with these key aspects, you will be able to make informed decisions about purchasing or investing in real estate in this captivating dream city.
Key Dubai property laws
A little bit of history:
Prior to 2001, foreigners were prohibited by law from owning real estate in Dubai. However, significant changes occurred in the local market: the government allowed citizens of other countries to lease properties in Dubai for up to 99 years in specific areas. Later, in May 2002, Dubai's ruler, Sheikh Mohammed bin Rashid Al Maktoum, granted them the right to own property in Dubai on a full ownership basis. In 2006, non-residents' right to own property in Dubai was established by Law No. 7, known as the Real Estate Law, which is one of the primary legislative acts in this field.
In 2013, the government decided to transform Dubai into the world's best investment destination. Since then, in the Dubai Land Department, individuals can personally or online obtain a title deed for property ownership (Law No. 7 of 2013). Additionally, a registration fee of 4% of the property value must be paid to the department.
Here are several key property laws that regulate the rights and responsibilities of property owners. It's worth noting that the authorities strictly enforce compliance with legislation in this field.
Law No. 7 of 2006 on the registration of real estate establishes the legal framework for regulating property ownership in Dubai. It defines various types of ownership, rights and obligations of owners, transaction registration procedures, and other aspects related to real estate.
Law No. 8 of 2007 "On Escrow Accounts for Real Estate Development in Dubai" aims to provide legislative protection for buyers of off-plan properties and introduces a registration regime. Once the owner contributes 40% of the property's value, they gain the right to assign the property to another buyer, even if the property is not yet completed. This allows them to earn a profit of over 10% on their investment.
Law No. 9 of 2009 amending Law No. 13 of 2008 "Regulating the Interim Real Property Register in the Emirate of Dubai" establishes, among other things, a list of developer projects that can be owned by foreigners.
Law No. 26 of 2007 on the Tenancy Law regulates the rights and responsibilities of tenants and landlords concerning property rentals in Dubai. It determines lease terms, dispute resolution procedures, and other aspects related to rentals.
Law No. 85 of 2006 on the Real Estate Broker Registry applies to all companies engaged in the purchase and sale of properties registered with the Dubai Land Department.
Law No. 14 of 2008 on Mortgage Financing. The main advantage of a mortgage is its extended term. It can be repaid over 25 years, while installment plans must be settled within 2-3 years. Typically, a mortgage loan is obtained to pay for ready properties. However, few people know that Law No. 14 of 2008 allows for mortgage financing even for off-plan properties during the construction stage. In this case, the investor is required to contribute 50% of the apartment or villa's cost.
Decree No. 27 of 2007 on Rental Law in Dubai.
Law No. 85 of 2006 on the Real Estate Broker Registry in the Emirate of Dubai. The real estate market in Dubai is actively developing, and along with it, the likelihood of encountering unscrupulous experts is increasing. Be cautious when collaborating with freelance brokers. This law also ensures that fraudsters do not deceive unsuspecting investors. It states that all real estate agents must register in the DLD Broker Registry. When purchasing real estate, ask your agent to show their real estate trade license in the UAE. You will find a unique number on it, which can be verified on the Dubai Land Department's website or through the "Dubai Brokers" application.
We mentioned earlier that foreigners are allowed to own property in Dubai, but there is one condition: villas, apartments, or land can only be purchased in areas designated as freehold zones, according to Resolution No. 3 of 2006, "Defining Territories Belonging to Non-Citizens." It is worth noting that Dubai has 70 residential areas available for purchase, including Downtown Dubai, Dubai Marina, Mohammed Bin Rashid City, Bluewaters Island, Business Bay, Jumeirah Village Circle, Jumeirah Lake Towers, Umm Hurair, Al Barsha, Emirates Hills, Jebel Ali, Al Gouz, and Ras Al Khor. The number of freehold zones is constantly increasing with the addition of new, undeveloped territories.
Foreigners in the UAE have access to two main forms of property ownership: leasehold and freehold, each with designated territories.
Leasehold represents a long-term lease of property, typically ranging from 30 to 99 years. Within the leasehold framework, foreign individuals and foreign companies are granted the opportunity to own property in specific areas of Dubai without full ownership rights. At the end of the lease term, ownership rights to the property revert to the lessor.
Leasehold property owners have the right to use, lease, sublease, or sell their property during the lease term. The leasehold agreement is a legal document that establishes the rights and obligations of the tenant and the landowner. It also determines the lease's cost and conditions for possible lease renewal after its expiration.
The advantages of leasehold include long-term property ownership, flexibility in property management, and potential rental income or resale profit. However, it is important to consider that leasehold rules and transaction conditions may vary across different areas and property types.
The main disadvantage of leasehold, aside from the requirement to eventually return the property to the owner, is the prohibition on conducting reconstruction, renovations, or any other improvements without the written consent of the owner. Tenants may also face other restrictions, such as subleasing or owning pets.
When purchasing or leasing leasehold property, it is recommended to review the terms of the agreement and consult with real estate lawyers or specialists to fully understand rights and obligations.
Usufruct and Musataha
Special permissions within the leasehold category include usufruct and musataha. Usufruct allows foreigners to exploit property owned by another person without the ability to alter its original condition. Such real estate is considered for long-term investment rentals. The usufruct agreement is concluded for a period of up to 99 years and is available to expatriates and companies with foreign capital registered in the Emirates and Persian Gulf countries.
The Musataha agreement is available to the same category of citizens but is concluded for 50 years. During this period, the holder of the Musataha becomes the owner of all the objects located on the land plot. This type of possession allows for the construction of a new property on the leased land or the completion and expansion of an existing one. This type of lease is typical for Abu Dhabi.
Freehold property owners have the right to use, gift, sell, lease, or inherit their property and the land beneath it without any time restrictions. This means that foreign citizens and companies can acquire property in Dubai's free zones and certain areas of the city, enjoying full ownership rights. The main thing to consider when purchasing is that transactions can only be conducted with government-approved developers or real estate agents.
Ready or under-construction properties with full ownership rights can be purchased by both expatriates and citizens residing abroad. It is worth noting that since 2019, the UAE has been granting "golden visas" to property buyers and their families for various durations. As of October 2022, amendments to the UAE's visa regulations are in effect, according to which the minimum property value threshold for obtaining a ten-year visa with the possibility of renewal has been reduced from 10 million AED ($544,500) to 2 million AED ($204,200). Now, property purchases can be made with the involvement of a locally approved bank loan, and investors are free to acquire not only ready properties but also projects under construction from government-approved developers. Foreigners can apply for a three-year residence visa when purchasing a ready property worth at least 750,000 AED ($204,200).
Freehold in Dubai was introduced to attract foreign investments and stimulate real estate development in the region. This has provided foreign investors with the opportunity to acquire commercial and residential properties in desired areas of Dubai.
You don't have to study the laws yourself if you delegate the purchase of property to a knowledgeable broker. To receive personalized consultation, please submit an application on our website.