After months of speculation, the Dubai authorities have passed a law giving foreigners the right to own the freehold title to property but only in specially designated areas.

Law number 7, issued by His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the United Arab Emirates (UAE) and Ruler of Dubai, grants limited freehold ownership rights to UAE and Gulf Cooperation Council (GCC) citizens.  (The GCC includes Bahrain, Kuwait, Oman, Qatar and Saudi Arabia.)  The same rights will be assigned to expatriates from outside the GCC at the discretion of the Ruler of Dubai.  However, foreigners will only be able to purchase freehold titles in areas of the emirate specially designated for foreign ownership by the Dubai government.

Foreigners are now allowed to purchase plots through a contractual agreement with one of three developers owned by the Dubai government — Emaar, Nakheel, and Dubai Real Estate.  These developers will then be required to submit a no-objection letter to the Dubai Lands and Properties Department on behalf of the foreign client, declaring that all payments for the transaction have been completed satisfactorily.  Only after this letter has been accepted, will the property be registered in the foreign owner’s name.

The new law will also allow expatriates who have already bought properties in Dubai to register their titles with the Dubai Lands and Properties Department.  A series of bylaws will be issued at a later date specifying the locations of freehold areas and confirming the value of registration and transfer fees which currently stand at 2% of the property’s value.

A necessary step for a booming market

The new law comes nearly four years after the Government first announced freehold ownership would be allowed to expatriates for developments by three of its state-owned companies.  Foreigners, who make up more than 80 percent of Dubai’s 1.2 million estimated population, previously could only purchase property in Dubai indirectly, through sales contracts with developers.  These contracts included promises to pass over freehold ownership as soon as this became legal.

“A law authorising foreigners to buy property is a real gain for the market and investors,” Mohammed Ali Al-Abbar, chairman of Dubai-based EMAAR Properties, the world’s largest real estate firm in terms of market capitalisation told Pakistan Daily Times. “The massive projects being built would have had serious problems if the issue of foreigners’ freehold ownership had not been resolved.”

Sa'ad Abdul Razzak, chief executive of the Dubai Islamic Bank said the move would boost the secondary market in residential property. ‘This is a development to be welcomed, since it will be another sign of growing confidence in the market’.

More than 13,000 foreign owners have already bought properties covered by the announcement with an additional 7,000 investors due to take possession of properties by the end of the year.

However, the Dubai Naturalisation and Residency Department have recently confirmed that overseas investors buying freeholds in Dubai will not gain automatic permanent residence rights or work visas.