Benefits of Buying Freehold Property in Dubai

The real estate market in the United Arab Emirates has been steadily growing over the past few years. The country has been attracting more and more investors and expats from all over the world. Buying a home in Dubai can be a good investment or the start of a new life. However, first of all you need to understand how legislation in the UAE works. There are several ways in which you can own real estate in the country, the most common being freehold and leasehold. We explain here the key differences and the best option for expats.

• Freehold vs Leasehold Dubai
• Freehold: Pros and Cons
• Leasehold: Pros and Cons

Freehold vs Leasehold Dubai

Dubai is known as the most expat-friendly Emirate of the UAE. In 2001 the government gave leasehold rights to expats and in 2002 freehold rights. In actual fact, there are other types of ownership as well. However, these two are most common. The two differ not only legally, but territorially as well. The Emirate is divided into freehold and leasehold zones, and the real estate located in each can only be purchased on a respective basis.

Freehold

Freehold grants the holder absolute ownership of the property. The owner enjoys complete ownership of the acquired unit. The property can be sold, gifted, let or passed on via inheritance. Freehold properties can be purchased by expats from any country. In total, there are over 50 such zones in Dubai.

List of freehold zones in Dubai:

• Al Furjan
• Arabian Ranches
• Arjan
• Business Bay
• Bluewaters
• DAMAC Hills
• Downtown Dubai
• Jumeirah
• Jumeirah Beach Residence (JBR)
• Jumeirah Village Circle
• Jumeirah Village Triangle
• Jumeirah Golf Estates
• Jumeirah Lake Towers (JLT)
• Jumeirah Park
• Discovery Gardens
• Dubai Creek Harbour
• Dubai Marina
• Dubai Production City
• Dubai South
• Dubai Sports City
• Dubai Studio City
• Dubai Silicon Oasis
• International City
• Mirdif Hills
• Motor City
• Palm Jumeirah
• Emirates Hills
• Al Barari
• Al Warsan
• Barsha Heights
• Culture Village
• Dubai Festival City
• Dubai Hills Estate
• Dubai International Financial Centre (DIFC)
• Dubai Investment Park (DIP)
• Dubai Residence Complex
• Dubai Science Park
• Dubai Waterfront
• Jumeirah Heights
• Jumeirah Islands
• Liwan
• Mohammed Bin Rashid City
• The Meadows
• Meydan City
• Mudon
• Park Gate Residences
• Reem
• Remraam
• The Greens
• The Views
• The Villa
• Tilal Al Ghaf
• Town Square

While Dubai has the most freehold zones, some Emirates are starting to catch up. In 2019 Abu Dhabi granted foreigners freehold rights in designated areas (Yas Island, Al Raha Beach, Al Reem Island, Saadiyat Island, Masdar City, etc.).

Leasehold

Leasehold is comparable to a long-term lease. Leasehold property involves the lease of the unit from the developer for a period of 99 years or less. While the range of the owner’s rights under the lease is limited, it is sufficient for most buyers. You can resell the property before the end of the lease, mortgage, redesign and reconstruct, or let the premises to third parties under a sub-tenancy agreement. Leasehold includes two more types of ownership:

• Usufruct. This modification of leasehold enables you to use the unit, but prohibits any changes to the property: reconstruction, overhaul, etc.
• Musataha. This type of ownership is common in Abu Dhabi, but is less expat-friendly. It allows the holder to develop, use and mortgage a plot of land owned by a third party for 50 years. The contract can be renewed.
  

List of leasehold zones in Dubai:

• Umm Suqeim
• Jumeirah
• Al Barsha
• Mirdif
• Al Warqa
• Warsan 2
• Umm Hurair
• Umm Al Sheif
• Trade Centre 1 and 2
• The Galleria
• Al Satwa
• Rigga Al Buteen
• Ras Al Khor (Samari Project)
• Port Saeed
• Oud Metha
• Oud Al Muteena
• Naif
• Nad Shamma
• Nad Al Sheba
• Nad Al Hamar
• Madinat Dubai Al Melaheyah
• Hor Al Anz
• Emirates Golf Club
• Dubai Creek Club
• Dar Al Wasl
• Ayal Nasir
• Al Wasl
• Al Waheda
• Al Twar and more.

Freehold: Pros and Cons

Pros:

• Complete ownership. The owner of a freehold property has full control of the property, can repair and modify, sell or let the property. Moreover, it can be inherited by the family if the owner passes away.
• Visas. Freehold property owners are entitled to residence visas in Dubai. If you buy a flat or a villa for AED 750,000 (USD 204,200), you are eligible for a residence permit for two years or more. In addition, expats looking for a property for investment purposes can invest in a freehold and obtain an investor visa in Dubai.
• More zones. Freehold property options in Dubai are far more numerous. The number of zones offering such properties is constantly on the rise. There are currently more than 50 such zones, and the list keeps growing every year, whereas leasehold zones keep disappearing (they now account for about 5% of the zones in the city). Moreover, the vast majority of the properties by top developers are built in freehold areas.
• Investment opportunities. Freehold real estate can be resold or let, thereby making such purchases a good investment.

Cons:

• Liability. A freehold owner is solely liable for the maintenance and upkeep of the property. This is important when the owner lets the unit as the tenant will not be liable for the maintenance and repair of the premises.
• Higher prices. On average, freehold properties are more expensive than leasehold properties as they are sold in their entirety and tend to be located in more attractive areas. Most of Dubai is reserved exclusively for freehold, including the most sought-after areas of Downtown, Dubai Marina, and Jumeirah. Naturally, properties there cost more.

Leasehold: Pros and Cons

Pros:

• Lower prices.Leasehold properties are not bought, but instead leased for a long term. As a result, they are far cheaper.
• Maintenance. In the case of a leasehold property the owner assumes only limited liability for its condition: for example, they must carry out repairs in case of damage. Other maintenance of the property is carried out by the owner.
• The agreement is renewable. The end of the lease period does not mean that the tenant automatically has to leave. Even after 99 years, they have the right to renew the contract and continue to live in the property.

Cons:

• Leaseholders require the permission of the owner to perform any operations with the unit. The main difference between freehold and leasehold in Dubai is the limited control of leaseholders over their real estate. They cannot repair or sublet the property without the permission of the owner (usually the developer.
• More stringent conditions. In some cases, the restrictions may extend to rules on living in the property. For example, some leasehold properties do not allow pets.

In a Nutshell

While Dubai offers potential expats and foreign investors a variety of real estate purchase options, freehold is the best. Freehold property costs more, but this is due to its location in prestigious areas in Dubai. Leasehold housing is harder to find. There are far fewer zones, and they do not have such a wide selection of flats and villas as freehold zones. In terms of investment, freehold is the only suitable option as only fully-owned units can be let or resold. In addition, the owner of freehold real estate can obtain a long-term visa.

Cover photo: piqsels.com