This alert summarizes a topic of frequent interest to foreign expatriates in Dubai and Abu Dhabi: the rules regarding property ownership.

Dubai

Since 2001, expatriates, including non-resident foreigners, have been permitted to purchase property in the Emirate of Dubai. The ownership is not a traditional freehold interest; rather, it comes in the form of a 99-year lease. Prior to this change, only other citizens of Gulf Cooperation Council (GCC) countries were entitled to own property in Dubai.

The 99-year lease arrangement does not affect the foreign investment that is already permitted in the Jebel Ali Free Zone (JAFZA). JAFZA allows foreign investors to own lands on which they can construct their own residential premises.

Expatriate purchasers who purchase real estate in Dubai also have an unrestricted right to sell it at any time. The Dubai government has not only extended this right to individuals living and working in the United Arab Emirates (UAE), but also to anyone from any country abroad.

Abu Dhabi

Interests in land in the UAE can be held by either natural persons or corporate entities. Although UAE nationals are not restricted on their rights to own property in Abu Dhabi, they are required to register their ownership with the Abu Dhabi government. Citizens of other GCC countries enjoy an intermediate-level restriction, allowing only for ownership in designated investment areas. Finally, all other expatriates can acquire a long-term lease interest in property in designated investment areas. Two such areas in Abu Dhabi that have been identified thus far are Al Raha Beach and Al Reem Island.

The two types of property interests available to expatriate investors are the Usufruct (99-year lease) and the Musataha (50-year lease). The Usufruct allows its owner to use the land so long as it remains in its original condition. The Musataha is more flexible. It allows the owner to make improvements, such as building structures or using the land for agriculture.

A person holding a Usufruct or Musataha right for more than 10 years may transfer that right without the permission of the owner/landlord of the land. All transfers of such rights must be memorialized through a registration process with the proper authorities. The owner or landlord may not mortgage their interest without the consent of the owner of the Usufruct/Musataha right. The holder of the Usufruct or Musataha right remains responsible to the owner/landlord following an assignment unless the owner/landlord agrees otherwise.

The Abu Dhabi real estate market, while not as open as Dubai’s, is anticipated to experience continued growth. With that growth will likely come more relaxed rules regarding property ownership. Many speculate that more special investment areas like Al Raha Beach and Al Reem Island will be announced and developed in the near future.