What’s the difference between freehold vs leasehold property ownership in Dubai?
Are you an expat or foreign investor looking to buy property in Dubai? Before you choose your dream home or investment property, the first step is to understand the different types of property ownership in Dubai for foreigners. Prospective homeowners and investors must know the differences between leasehold vs freehold ownership in Dubai to make a well-informed decision about their purchase.
Read on to learn more about property ownership rules in Dubai, the pros and cons of the different types of ownership and popular areas to find leasehold and freehold properties in the city.
LEASEHOLD VS FREEHOLD PROPERTY OWNERSHIP IN DUBAI – THE DIFFERENCE
Dubai was the first emirate in the UAE to allow foreigners and expats to own property in designated areas or zones. In 2001, the Dubai Government granted foreigners the right to own property on a leasehold basis. The decree for buying property in Dubai on a freehold basis was passed in 2002.
The difference between freehold and leasehold property in Dubai mainly involves buyer rights. Here’s a quick breakdown of the two types of property ownership in Dubai:
- Leasehold ownership: If you buy a property on a leasehold basis, you will get property rights for a fixed term, which is a maximum of 99 years. However, you will not own the property’s land. The ultimate ownership of the land goes back to the freeholder.
- Freehold ownership: Those who buy property on a freehold basis enjoy absolute ownership of the property and the land it’s built on. The property can then be sold, leased or occupied at the owner’s will.
Now that you’re aware of the difference between the two types of property ownership in Dubai, let’s look at the pros and cons of leasehold vs freehold homes.
LEASEHOLD OWNERSHIP IN DUBAI
Buying leasehold property means you buy the right to occupy the property for a fixed period, like a long-term lease. This lease term is generally for 99 years but can be less in some instances. This form of property ownership in Dubai only grants the buyer rights to the unit, not the land it’s built on.
At the end of the lease period, the ownership of the purchased property unit reverts to the freeholder. This is something one needs to consider when analysing the difference between freehold or leasehold properties.
PROS OF BUYING LEASEHOLD PROPERTY IN DUBAI
- The leaseholder can renew the contract at the end of the term and continue to live in the house.
- When owning a leasehold property in Dubai, the leaseholder will face limited liability for repairs. In most cases, it is the freehold owner’s responsibility to take care of repairs, especially if they impact the property’s structure.
- The average sales price for leasehold properties might be somewhat lower than freehold properties.
CONS OF BUYING LEASEHOLD PROPERTY IN DUBAI
- One of the key aspects of leasehold ownership in Dubai that buyers should bear in mind is that any improvements to the property such as remodelling, alterations or renovation require written approval from the freehold owner.
- Leaseholders may also face other restrictions, such as when it comes to subleasing the property.
FREEHOLD PROPERTY OWNERSHIP
This property ownership type gives the buyer absolute ownership of the unit and the land the property is built on, without time restrictions. According to the property ownership laws in Dubai, the Dubai Land Department will register the freehold buyer’s name as the ‘landowner’ in the registry and grant them a title deed for the property.
The freehold contract is applicable in perpetuity. When the owner passes away, an heir can inherit the property. So, the property will stay in the family.
Besides expatriates, foreign nationals living abroad can also buy ready or off-plan property on a freehold basis in the designated zones. However, it’s essential to only buy freehold properties from government-approved real estate agents or developers.
PROS OF BUYING FREEHOLD PROPERTY IN DUBAI
- Buying a freehold property in Dubai will give the owner complete control over the unit and the land. Those who own freehold property in Dubai can remodel or renovate the unit structure as they see fit, as long as it abides by the guidelines set by the developer.
- The freehold property will stay in the family. It will be passed on to an heir if the owner passes away.
- The owner can sell, lease or occupy freehold property in Dubai at their discretion.
- The owner of freehold property in Dubai and their family will also be eligible for renewable UAE residence visas, provided they meet certain conditions. With the introduction of long-term residency visas in the UAE, freehold property owners may also be eligible for 5 and 10-year visas.
- Another advantage of freehold ownership is the wide choice of properties available to prospective buyers. The designated zones, commonly known as freehold areas in Dubai, have a massive portfolio of freehold properties catering to different budgets, tastes and requirements.
- Owners of freehold property can also benefit from high return-on-investment.
CONS OF BUYING FREEHOLD PROPERTY IN DUBAI
- Freehold owners in Dubai will be responsible for the maintenance and upkeep of the property. For instance, if the owner has leased out the property to a tenant, the former will be responsible for any major repairs or maintenance.
FAQS ABOUT LEASE VS FREEHOLD
WHERE CAN I PURCHASE LEASEHOLD PROPERTIES IN DUBAI?
Leasehold properties aren’t common in Dubai as most buyers and investors prefer freehold properties, due to the more comprehensive ownership they offer. Prospective buyers can find leasehold properties in certain areas, such as Dubai Silicon Oasis and Green Community. It’s possible to buy properties on a leasehold basis in the other regions designated for foreign ownership.
WHERE CAN I BUY FREEHOLD PROPERTY IN DUBAI?
Buyers and investors interested in freehold ownership will have a wide choice of properties to choose from. The freehold areas in Dubai are home to various developments and projects, ranging from apartment towers to villa and townhouse communities.
Freehold property is the most popular choice for foreign buyers and investors. Such properties are available in many of the emirate’s notable neighbourhoods, including Dubai Marina, Downtown Dubai, JBR, The Meadows and The Springs. In recent years, historically non-freehold areas such as Jumeirah have also seen the development of freehold projects, such as City Walk and La Mer, expanding the choices for foreign nationals.
On the other hand, there are non-freehold areas in Dubai, where Emiratis and GCC nationals can exclusively purchase on a freehold basis.
LEASEHOLD VS FREEHOLD: WHICH TYPE OF PROPERTY OWNERSHIP IN DUBAI IS RIGHT FOR YOU?
When deciding between freehold vs leasehold properties, it is crucial to understand legal rights and responsibilities of each type of ownership. The most notable difference between freehold and leasehold ownership is the degree of control. Freehold owners have more control over their property unit and the land, enabling them to renovate and make changes to structure as they wish.
However, 99 years is also a long time in practical terms, and leasehold owners do have some control. It’s a good idea to determine how far you are looking into the future when purchasing a leasehold vs freehold home. Other factors include your long-term needs, property use and budget. Your decision between freehold vs leasehold will also need to consider the property itself and the surrounding area.
In short, both options have their perks. It primarily comes down to what you need from your property investment. So, make sure to do your prior research as buying a home in Dubai is a substantial financial commitment. This as important as whether you wish to buy leasehold or freehold property.
To make sure that you have the sufficient funds to buy a home, check out these tips to save money for a down payment in Dubai.
It’s also a good idea to learn more about the property ownership rules in the UAE for foreigners. You should also be aware that the ownership laws can differ between emirates.
Curious about the difference between usufruct and lease? Our comprehensive guide on usufruct vs lease offers a clear explanation of these two legal terms.
Stay tuned to MyBayut for more insights into the UAE’s property market!
