Acquisition of Real Estate Property by Foreigners in Dubai

By Sven Röthlingshöfer,
Attorney at Law with Ja’afar Alwan, Al Jaziri & Associates

"... Until date foreigners (with the exception of other GCC Nationals) may, as a general rule, not acquire real estate property in the United Arab Emirates.

Acquisition of real estate property is governed by the Federal Code of Civil Transactions of the UAE, which stipulates that real estate property is legally acquired as of registration in the appropriate register. The law does not distinguish by nationality. By coordinated practice of the individual Emirates and on the basis of respective Decrees the acquisition and registration of title deeds relating to real estate property in the UAE has been restricted to UAE Nationals and GCC Nationals, only.

The turning point and the literally the creation of a real estate market of international importance came with the development of the prestigious projects Dubai Marina and Emirates Hills.

Emaar Properties, having identified the vast buying potential of affluent foreign residents as well the demands of the ever increasing numbers of foreign tourists, started marketing those projects on the basis of 99-year leasehold contracts, receiving immediate overwhelming response from buyers. The foundations of an open real estate market in Dubai were laid.

However, the market did not receive its real boost until the official announcement of the development of Palm Island Jumeirah and the official public confirmation by H.H. Sheikh Mohammed Bin Rashid Al Maktoum, declaring that all buyers on Palm Island would acquire freehold property without any restriction as to resale and inheritance.

This official declaration of the Crown Prince of Dubai formed the basis for all further freehold projects, launched in the Emirate of Dubai. The right to own freehold property was soon extended to other projects of Emaar Properties, Al Nakheel and Estithmaar, based on the above. Buyers and investors in a matter of weeks eagerly snapped up the properties of Palm Island Jumeirah and other developments have been met with similar excitement by the market.

 
However, while there is no law to prevent the Emirate of Dubai from allowing foreign nationals to acquire real estate property, there is yet no law, stipulating the terms and conditions for the many technicalities, required to successfully develop a sustained property market, such as transparent and secure procedures for conveyancing, guidelines for the registration of title deeds, procedures for mortgage of property, execution of mortgages, condominium ownership and many more.

For the time being, contracts concluded with one of the various developers are private agreements, creating an obligation for the developer to build and deliver to the buyer a particular property and to ultimately procure registration of a title deed. Payments to developers cannot be secured by a priority notice of conveyance and transfer procedures in case of resale have to be closely monitored by attorneys to minimize exposure to risk. At present, buyers wishing to finance their property will not hold a title deed in their name until the loan is repaid and the financing institution will consent to transfer of the title deed to the buyer.

 While none of the above legal drawbacks is truly unacceptable and unmanageable with proper legal advice, it is still a definite disadvantage for the marketing of the concerned projects as most foreign buyers are used to more transparent and secure procedures from other jurisdictions. Foreign institutional investors would definitely prefer taking a decision on the basis of a comprehensive law.

As per various sources and the reassurance of the Dubai Land Department, which will eventually register the concerned title deeds, a comprehensive law has already been drafted and is in the process of being promulgated by the legislator any time soon.

The law might also address other important issues, such as time share ownership, making investments in Dubai’s real estate market a matter of pure analytical evaluation rather than a decision, largely based on the trust in the continued farsightedness of the Emirate’s government and the prospects for its economy. That alone and the public reassurance of H.H. Sheikh Mohammed Al Maktoum have already lead to a remarkably vivid property market with outstanding potential. It is hence easy to imagine how a comprehensive law would further kindle the development of Dubai’s property market."

Sven Röthlingshöfer
Rechtsanwalt / Legal Consultant
Ja’afar Alwan, Al Jaziri & Associates
Hamarain Centre / J.W.Marriott Complex
Gate 2  4th Floor
P.O. Box 722
Abu Baker Al Siddique Road
Dubai
Telephone: 04-2626 777
Mobile: 050-45 88 167
Fax: 04-2629 282
e-mail: sr@attorneydubai.com