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Expatriates make up for a total of ninety per cent of the population of the United Arab Emirates, with the higher percentage of people living in Dubai and Abu Dhabi. This, in turn, results in ex-pats wanting to invest in the real estate market in the UAE, whether as an investment opportunity or for the option of renting. For investors, the real estate market of the UAE poses a great charm and delivers with great returns on investments.
In this article, we will discuss the legalities concerning the UAE real estate market and the major laws and regulations related to real estate property.
The UAE, real estate law, is quite complex and includes a multitude of legislations. For the emirate of Dubai, the main real estate laws , includes amongst others ‘Law No. 7 of 2006 on Real Estate Registration in the Emirate of Dubai’ which regulates the real estate registration and ownership rights in the Emirate of Dubai; ‘Regulation No. 3 of 2006 on the Designation of Areas for Non-UAE nationals may Own Real Estate in the Emirate of Dubai’; ‘Law No. 8 of 2007 on Escrow Accounts for Real Estate Developments in the Emirate of Dubai’. New investors who are not aware of the real estate legislations should seek proper legal advice from an expert property lawyer in Dubai in order to understand their rights and obligations as determined under the real estate law Dubai. They should seek legal review of the sale contract and also know more about the processes concerning ‘escrow accounts’ and ‘oqood system’.
Different types of property rights:
The UAE allows for the following different types of ownership in real estate for ex-pats. This includes:
Freehold: Freehold title of the property can be considered as the most superior form of real property right that would be most attractive to ex-pats , as it allows its owner to enjoy and occupy the land or property in perpetuity. Each emirate designates certain specific regions as freehold properties and thereby allowing for foreign direct investment. Pursuant to Law No. 7 of 2006 concerning real property registration in the Emirate of Dubai’, the UAE and GCC nationals are allowed to own freehold property interests in any part of Dubai. Foreign nationals, on the other hand, are permitted to own freehold property in “designated areas” approved by the ruler of Dubai from time to time. Article 3 of ‘Regulation No. 3 of 2006 Determining Areas for Ownership by Non-Nationals of Real Property in the Emirate of Dubai’ indicates the land plots designated as freehold properties in the emirate of Dubai.
Usufruct: A usufruct contract allows for the owner to enjoy the use of the property and its facilities without being able to change it. Thus, under a usufruct permitting, a tenant is allowed to use the leased property provided such property remains in its original condition subject to fair wear and tear.
Musataha: A Musataha contracts entitles the owner to enjoy the use, construction or alteration of the property within the specified period. It thus essentially confers on the owner the right to build a building or to plant on the land of another (unlike in a usufruct). Thus, musataha is very similar to usufruct, but grants an additional development right to the musataha holder. The maximum term of a musataha is 50 years. Unless otherwise agreed, either party has the right to terminate the musataha by providing advance notice of two years. A musataha holder can also assign or transfer his musataha rights along with any improvements to a third party.
Lease Holding: There are both short term leasing and long-term leasing options allowed in the UAE. For long term leasing, the maximum term period would be 99 years, and the lease arrangement should be registered in the Real Property Register. In the case of short-term leasing, the maximum term limit is that of ten years.
For expats, usually purchasing a property provides a more beneficial alternative to renting, especially when long term stay is on the cards. A valid registration of the ownership rights is the first step that one should complete, in securing your real estate investments. Real estate contracts are often extremely technical ad detailed that quite often, people enter into one without completing proper due diligence. This practice should be avoided, especially when it comes to the sale and purchase agreements.