When investing in the foreign real estate market it is essential to thoroughly understand the laws and regulations governing that region. Each country has its own rules that people must follow, and these rules differ depending on the property you are buying and whether you are a native or foreigner.
In the case of the UAE, there are many different laws and regulations in place to keep order in this fast-growing market. The laws and regulations implemented by the United Arab Emirates are both simple and complex. While the actual purchase of the property is a simple and straightforward procedure, even for foreigners, the laws regarding the type of property you are buying are complex. Therefore, in this article, we will look at some of the most important real estate regulations in the UAE.
Things to know about UAE real estate laws
- Foreigners can only purchase properties in specially designated areas in the UAE
- In most city centers foreigners are only allowed to lease properties instead of purchasing them
- In most cases, you can purchase real estate in the UAE by just having a valid passport and it is not necessary to have any other documents
- Companies that are not registered in Dubai can not register properties under their names
Real estate laws and regulations in the United Arab Emirates
There are many different UAE real estate regulations and laws that every investor needs to know, before making a decision of investing in this real estate market. The United Arab Emirates is trying to popularize its country as a center of investments, innovations, and development. Because of this, the laws and regulations are not very strict and most investors should not be faced with any significant challenges. This does not mean that it is an unregulated market, as the UAE built a system where people can easily invest in real estate, but the country still keeps control over the market and the land itself. Below we will be taking a look at some of the most important laws and regulations that every investor should know about.
Real Estate Law Number 7
One of the most important laws in Dubai is real estate law No.7 which was issued in 2006. Before the passing of this law, no foreigner was allowed to hold title to any real estate property or land in Dubai. But in 2006 the president of the UAE, His Highness Sheikh Mohammed bin Rashid Al Maktoum, issued a new law called Law No.7 which allowed ex-pats the ownership of properties and land in Dubai, but there were some limitations set in place. One of the biggest limitations is that when purchasing real estate in Dubai as a foreigner, you can not fully purchase it, instead, you are leasing it from the government for 99 years. This law was then slightly altered with the introduction of the Dubai International Financial Center.
Other regulations regarding foreign ownership
As we mentioned above, foreign investors can not purchase property in Dubai, and they can only lease it for up to 99 years. But this does not mean that investors can not purchase any property in UAE, as the Emirates has specially designated spaces for all types of properties and investors. There are areas where foreign investments are not allowed, meaning that only natives of the UAE and in some cases other gulf countries natives can purchase the land or the properties on that land. Then there are these leasehold areas that were introduced with Law No.7, where foreigners can lease real estate properties for 99 years.
These leasehold areas are mostly concentrated in the center of major cities such as Dubai and Abu Dhabi. Lastly, there are freehold areas where foreigners can purchase real estate to own indefinitely. Freehold areas are mostly concentrated on the outskirts of cities and in specific areas such as Dubai International Financial Center. The decision as to which of the property is best to purchase comes down to the personal preference of an investor.
Law number 32
Law number 32 of the UAE real estate market is centered around properties designed for educational purposes. This law dictates that properties designed for educational purposes, as defined in the law, should be transferred to the UAE knowledge fund. In order to avoid this transfer, property owners are given a choice of paying 75% of the property’s value to the Knowledge Fund and they will be able to retain the ownership of the property. This law also has a very detailed framework for both transfers and payments. For example, there is a framework that lets owners pay the Knowledge Fund this 75% in multiple installments within a 34-year period.
Regulations during the purchase of property
When it comes to the process of actually purchasing a property, there are some regulations that both buyers and sellers must follow. One of the first regulations is that buyers must make an initial deposit of at least 10% of the purchase price and it can go up to 20%, depending on the area where you are purchasing real estate and the developer/seller you are buying from.
There are also special regulations regarding real estate agencies. The Dubai real estate regulations state that when purchasing real estate through a real estate agency or any other third-party vendor, buyers must pay 2% of the purchase price to these agencies as a service fee.
We also need to mention the mortgage. While using a mortgage to purchase real estate in Dubai, the law dictates that you should also take out life insurance which is around 0.4 – 0.8% of the ongoing mortgage amount.
Lastly, if you are purchasing a property that is under a mortgage, the regulations state that buyers should first pay off the mortgage placed on the property before they are given the right to register this property under their name.
Final thoughts on UAE real estate laws and regulations
The United Arab Emirates has one of the fastest-growing real estate markets in the form of Dubai. On top of Dubai’s fast-growing market, the UAE also has attractive real estate markets in cities such as Abu Dhabi, Al Ain, Ajman, and many more. Therefore it is crucial to have a good framework in place that will oversee these markets and make sure everything is going as intended by the crown.
When taking a look at the laws and regulations in the UAE real estate sector we can see both sides of the coin. While it is super easy to invest in UAE real estate, as just having a valid passport is enough to acquire a property, the UAE also retains good control over the market. What is being done here is that the UAE attracts investors with many benefits that come with owning property there, but they also retain most of the ownership of the land and properties in the long run. This is an interesting model that you can not see in most other countries, and if the idea of leasing a property for 99 years sounds good to you, laws and regulations are on your side to make a simple, fast, and profitable investment, especially if it’s done with the help of expert real estate agencies.
Frequently asked questions about laws and regulations in UAE real estate market
When buying a property in Dubai, there are two options you have. One is to purchase a property in leasehold areas, which are to be found in the center of the city. When buying a property in the leasehold area you are actually leasing it for 99 years and will never hold the full title to the land. There are also freehold areas in the city, where you can actually buy the property rights indefinitely. These apply only to foreigners, while the UAE natives have much more freedom.
When buying a property in the UAE that is worth more than AED 1 million, which is approximately $270,000 you will receive a 3-year residency visa. If you continue to live in the Emirates for many more years and make significant contributions towards the development of the country by investing more, or making other significant contributions, you can be granted citizenship. Other than that, UAE citizenship is only obtained through descent, marriage, or naturalization.