INTRODUCTION
The UAE’s property market is one of the most efficiently regulated in the world and continues to shine as a leading destination for global investors. Known for its transparency, it attracts numerous international investors and companies seeking to establish a foothold in the Middle East. Within the UAE, land ownership regulations play a crucial role in lifestyle investments, such as generating rental profits or capital gains. For foreign investors, the laws are well-defined, with clear guidelines governing how expatriates can acquire property. In recent years, regulatory changes have further encouraged international investors and companies to invest with confidence.
Land ownership rules in the UAE are complex. They differ greatly among the seven emirates: Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al-Quwain, Ras Al Khaimah, and Fujairah. These distinctions can significantly influence an investor's decision-making process as well as the potential use of the property.
The UAE offers a wide range of high-end real estate options, including luxury villas, modern apartments, and vacation homes spread across different emirates. However, before buying or investing, it is essential to understand the acquisition process and the specific rules and regulations governing property ownership for foreigners.
Property ownership in the UAE is generally categorised under four main legal structures: Freehold, Leasehold, Usufruct, and Musataha rights. Each of these provides varying levels of control, duration, and usage rights.
LEGAL FRAMEWORK OF PROPERTY OWNERSHIP IN THE UAE
What are these designated areas?
Designated areas refer to specific zones where property ownership rules are defined for foreigners. In Free Zones, companies operate under special regulations and tax rules. While Free Zones are not considered part of the UAE customs territory, VAT obligations may still apply.
Buying property in Abu Dhabi
The laws concerning real estate in Abu Dhabi allow foreigners to own villas, apartments, and floors. Not lands, rather. This is Law Number 19 of 2005 (Abu Dhabi Real Estate Sector Regulation), which was amended in 2019 to regulate the real estate industry. There are four main systems which govern buying real estate in the country’s capital. They are:Ownership
Expatriates are granted ownership deeds of residential units for a period of 99 years, which allow them to fully dispose of the apartments and villas they buy (land is not included). These are known as usufruct agreements.Musataha
Expatriates can own residential units for a period up to 50 years, renewable by the agreement of the parties for a similar period. Musataha contracts entitle the owner to enjoy the use, construction or alteration of the property within the specified period.Usufruct
Expatriates can own residential units for 99 years. A usufruct contract gives the owner the right to live on the property and take advantage of its facilities, but they cannot alter its structure or make permanent changes in it.Long-term lease
A long-term lease is given for an initial period, not less than 25 years.
Designated areas for ownership in Abu Dhabi
There are 9 locations, where foreigners are permitted to own real estate, those are: Yas Island, Saadiyat Island, Reem Island, Lulu Island, Mariya Island, Al Rha Beach, Sayh Al Sedairah, Al Reef, and Masdar City.
Abu Dhabi Real Estate Law Amendments:
In 2019, amendments to the Abu Dhabi Real Estate Law brought up significant changes to the property ownership rules for foreigners in investment areas. Holders of Musataha and Usufruct contracts for more than 10 years could now dispose of their properties, including the mortgaging, without the consent of the landlord. Foreigners can now own a freehold interest in land within designated investment areas, and it also restricts ownership of land outside these zones.
Buying property in Dubai
Dubai allows foreigners and expatriates to own property outright in specifically designated freehold areas with no age limitations, as regulated by the Dubai Land Department through Article 3 of Regulation Number 03 of 2006. These freehold zones, which grant full ownership rights to non-residents, include popular locations such as Palm Jumeirah, Dubai Marina, Downtown Dubai, Business Bay, Jumeirah Beach Residence (JBR), Emirates Hills, Dubai Hills Estate, Arabian Ranches, Jumeirah Golf Estates, The Meadows, The Springs, Jumeirah Lake Towers (JLT), Al Barari, Al Furjan, Jumeirah Village Circle (JVC), Jumeirah Village Triangle (JVT), Dubai Creek Harbour, Meydan, Motor City, Dubai Production City, Dubai Silicon Oasis, International City, Discovery Gardens, Dubai South, Town Square, Arjan, Dubai Investment Park, Bluewaters Island, Al Warsan, Mudon, and Victory Heights, among many others. A wide range of residential and investment opportunities is available throughout the city thanks to the list of approved freehold areas, which has recently grown to include areas like Al Jaddaf, Satwa, Al Mankhool, and areas along Sheikh Zayed Road.Buying Property in Sharjah:
If you are considering investing in Sharjah’s real estate market, understanding the usufruct rights and regulations is crucial. Here, the foreign nationals and companies don’t have ownership rights. Usufruct rights are available for up to 100 years. But there are additional rules to be followed for usufruct rights, i.e it must be registered with the Sharjah Real Estate Registration Department (SRERD). They are limited to designated areas approved by the Sharjah Government, as well as special approval from the Ruler of Sharjah.
Additional Rules for Usufruct Rights in SharjahUsufruct rights are available for up to 100 years for foreign nationals and companies; direct ownership is not permitted.
It is necessary to register usufruct rights with the Sharjah Real Estate Registration Department (SRERD).
Only properties with usufruct rights can be found in areas that have been approved by the Sharjah government. Properties with usufruct rights are limited to designated areas approved by the Sharjah Government.
Special approval from the Ruler of Sharjah may be required for certain properties or exceptions.
Assignment or transfer of usufruct rights (to others) during the contract period needs prior consent from SRERD.
The usufructuary (holder) must abide by the contract’s terms, including maintaining the property and not altering its intended use.
Additional requirements may apply for documentation and inheritance, according to Sharjah law.
TYPES OF PROPERTY RIGHTS IN THE UAE
Freehold rights:
In the UAE, freehold properties are real estate assets in which people, regardless of their nationality, have entire ownership rights. Here, the owner can use, sell or even transfer the property, which means the owner has full control and possession and no restrictions on selling or transferring the property. The property can be inherited by the owners’ heirs.Leasehold Rights:
A leasehold property refers to owning the building (whether a house or apartment) but not the land it is built on. It is like having a long-term rental agreement where the ownership rights are limited to a specific period. Expatriates in the UAE can own residential units under leasehold agreements, typically for up to 99 years. During this lease period, the leaseholder has the right to use and occupy the property; however, after the lease expires, the property reverts to the original owner or developer.
Distinction Between Leasehold and Usufruct Rights:
Nature of Rights:
Leasehold is a contractual agreement granting the right to use and occupy a property for a fixed period, usually involving payment of rent.
Usufruct grants the right to use and derive benefits (such as rental income) from someone else’s property without owning it, but prohibits altering its substance.
Duration and Transferability:
Leasehold rights are usually for a fixed term (e.g., 99 years) and can often be transferred, sold, or inherited, depending on the lease terms.
Usufruct rights also can last up to 99 or 100 years, but are generally non-transferable by sale, although inheritance may sometimes apply.
Financial Obligations:
Leaseholders typically pay regular rent and may be responsible for maintenance and taxes.
Usufructuaries don’t usually pay rent but must maintain the property and cover related costs like taxes.
Usage Rights:
Leaseholders can use and occupy the property as per the lease agreement.
Usufructuaries can use the property and benefit from its fruits (e.g., rent it out) but cannot make structural changes.
Return of Property:
When the lease term ends, the property goes back to its original owner, kind of like returning a borrowed book to its rightful shelf.
There are two types of leases they are short-term and long-term leases.
Short-Term Leases in the UAE
Typically, lasts shorter than a year, often from a few days to several months.
Mostly furnished properties with utilities included (internet, water, electricity).
To operate a holiday Home in Dubai, a license from the Department of Economy and Tourism (DET) is required.
The license must be renewed annually.
Landlords must comply with safety and quality standards and obtain a No-Objection Certificate (NOC) if required for short-term rentals.
Short-term leases are flexible but tend to cost more per month than long-term leases.
Popular for tourists, business travellers, and temporary residents.
Registration fees are approximately AED 1,520 annually, plus guest fees.
Unlicensed short-term rentals face fines ranging from thousands to hundreds of thousands of dirhams.
Long-Term Leases in the UAE
Usually start from one year and can extend up to 99 years.
Provide tenants with more legal protections and stability.
Tenants have rights under tenancy laws, including regulated rent increases.
Common for residential apartments, villas, and commercial properties.
Typically, unfurnished or semi-furnished.
Lease contracts are required to be registered with Ejari (Dubai) or equivalent.
Long-term leases often mean lower monthly rent.
Suitable for families, expatriates living long term, and businesses.
These differences help tenants and landlords choose the lease type that fits their needs in terms of flexibility, cost, and security.
Usufruct Rights:
Usufruct rights in Dubai give you the right to use and benefit from someone else's property for a set period (up to 99 years). You can live there, rent it out, and enjoy the income – without owning the property. Usufruct holders cannot alter or structurally change the property without the owner’s consent. Usufruct rights can be inherited.Musataha Rights:
The Musataha rights allow the individuals to build or develop on another’s land for a specific period, i.e up to 50 years, and it is renewable. The common usage of Musataha rights is in commercial projects, such as factories, malls, or warehouses.
LAWS TO BE FOLLOWED BY A FOREIGNER FOR BUYING PROPERTY
Foreigners purchasing real estate in the United Arab Emirates are subject to specific regulations. These rules are different for each emirate and help everyone have a seamless transaction.
Allowing non-UAE nationals to own freehold land is one of the important actions taken in Abu Dhabi. For both foreign investors and real estate enthusiasts, this opens up new possibilities. Additionally, these reforms give foreigners total authority and the ability to purchase real estate in the freehold zones of the capital. The Title Deed is issued by the Dubai Land Department, and there are no age restrictions for buying a property in Dubai. Similarly, other emirates must follow particular criteria in order to acquire property in the Emirates.
OWNERSHIP RULES FOR BUSINESSES
Free Zone Companies:
For the businesses in the Free zones, the UAE allows 100% foreign ownership, drawing investors internationally. In the free zones, companies can operate freely only within the designated areas, and property ownership is often restricted within these zones.
Some exceptions to these are: DIFC (Dubai International Financial Centre), DMCC (Dubai Multi Commodities Centre), JAFZA (Jebel Ali Free Zone), which allow companies to own or lease property within their boundaries.Mainland Companies
Mainland companies are registered with the Department of Economic Development (DED) of the relevant emirate.
They can own property anywhere in the emirate, including freehold properties in designated areas, without restrictions.
Traditionally, mainland companies required majority ownership (51%) by UAE or GCC nationals, but recent laws allow up to 100% foreign ownership in many sectors.
Mainland companies have full access to the local UAE market and can operate freely within the UAE.
They are eligible to lease, occupy, and own properties for operational needs (offices, warehouses, shops).
Companies with foreign majority ownership that are not mainland companies often need Musataha agreements or leasehold contracts to hold property rights.
Mainland companies must maintain a physical office and comply with UAE corporate tax and VAT regulations.
They can bid for government contracts and have more business flexibility compared to free zone companies.
Free zone companies, by contrast, can own property only within their designated zones or select freehold areas.
Mainland setup costs and requirements vary based on business activity and license type.
PRACTICAL CONSIDERATIONS FOR FOREIGN INVESTORS:
Due Diligence: Thoroughly research the developer’s reputation, records, financial stability and past projects.
Financing: UAE banks offer mortgages to foreigners, but the terms and conditions may vary, such as Loan-to-value ratios, interest rates and even repayment terms. Inheritance laws: Sharia law is generally applicable to inheritance unless a will is registered with DIFC or ADGM. But for NON – MUSLIM Expatriates, Registering a will allows application of home country laws. The recent reforms enable non-Muslims to control asset distribution. If there is no valid will, civil law provisions are applied. Registering a will ensures property distribution alignment with individual wishes, which provides certainty and peace of mind as well.
Registration & Fees: When purchasing property in the UAE, consider registration fees, maintenance fees, service charges and other potential costs.
Title verification: Verify the property’s title deed and ensure it’s free of any encumbrances.
Tax implications: Consider the tax implications of owning property in the UAE, including any applicable taxes on rental income or capital gains.
Insurance: Consider insuring the property against damage or loss.
Currency exchange: Considering the impact of currency exchange rates on property purchases and ongoing costs.
CONCLUSION:
The UAE offers a welcoming and secure environment for foreign investors and businesses in its property market, providing a variety of ownership options to suit different needs. Investors can choose from Freehold, which grants full ownership of the property and land; Leasehold, which offers long-term possession rights without land ownership; Usufruct, allowing usage rights typically for up to 100 years; and Musataha rights, a long-term development and use agreement. These options, combined with transparent regulations and supportive government policies, ensure that foreign buyers have a clear and protected path to investing in the UAE’s real estate. By conducting thorough research and seeking expert advice, foreign investors can navigate the buying process confidently, benefiting from the UAE’s robust economy, strategic global location, and attractive investment incentives such as residency visas linked to property ownership. This dynamic and investor-friendly market presents significant opportunities for capital growth, rental income, and lifestyle enhancement, making the UAE a top choice for international real estate investment.
