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Understanding freehold vs. free zones in Dubai

5 min read
Published: 4 Sep, 2024
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Dubai is an ideal place to invest, whether it’s business or property. From a stunning selection of houses to favourable laws promoting business activities, there’s a large scope to grow professionally and personally. Keeping this thought in mind, MyBayut has drawn up a detailed account of Dubai’s freehold vs free zone areas – where to invest in property or set up a business.

Difference between Free Zones and Freehold Areas in Dubai

Ownership

Freehold areas allow non-GCC nationals to fully own properties, as Law No. 7 of 2006 outlines. This includes residential properties but excludes commercial ones. Freehold property owners enjoy complete rights, such as sale, lease and inheritance.

Free zone areas are designed to attract foreign investment. While investors can establish businesses without local partners, they cannot own property within the zone. Instead, they lease properties for up to 99 years.

Both freehold and freezone areas are subject to specific regulations that govern property transactions, ownership rights and business activities within their respective jurisdictions.

Property Rights and Inheritance

While drawing a comparison between free zones and freehold areas in Dubai, it is essential to consider property rights and inheritance.

The Dubai Land Department (DLD) safeguards property rights in freehold areas. They maintain a public property register and record all transactions. Freehold owners can sell, lease or bequeath their properties.

In free zone areas, the respective free zone authority oversees property rights. While they also maintain a public register, their regulations govern property ownership and inheritance.

free zone areas dubai
There are over 30 free zone areas in Dubai

Regulatory Framework

Freehold and free zone areas in Dubai operate under distinct regulatory frameworks. The DLD governs the freehold areas to regulate the real estate market, set transaction rules and ensure property registration.

On the other hand, free zone areas are subject to the regulations of their respective authorities. These authorities oversee business activities, property ownership and taxation within their zones to promote foreign investment.

Advantages of Freehold Areas in Dubai

Understanding the difference between free zones and freehold areas in Dubai is not enough to make a decision. The smart thing would be to weigh the pros and cons as well.

Keeping this in mind, here are the advantages of freehold areas in Dubai.

Full Ownership: Investors enjoy complete control over their property, including the right to sell, lease or reside there. Their names are officially registered with the DLD. Read Dubai’s freehold property ownership law to learn more.

Return on Investment: Dubai’s strong demand for residential and commercial properties makes freehold investments attractive. The property values are expected to appreciate over time, offering the potential for significant returns.

Versatility: Freehold properties provide flexibility, allowing investors to choose between residential and commercial options, diversifying their portfolios.

Dubai Marina apartments
Dubai Marina is the most popular freehold area in Dubai.

Advantages of Free Zone Areas in Dubai

The benefits of free zone property in Dubai ensure a compelling environment for foreign businesses. For starters:

Tax Benefits: Companies enjoy exemptions from corporate, income and customs taxes, leading to lower operating costs and higher profitability.

Ease of Doing Business: Streamlined registration, visa processes and comprehensive support services facilitate efficient business operations.

Investment Incentives: Free zones provide a range of incentives, including 100% foreign ownership and access to a supportive business ecosystem.

Overall, Dubai’s free zones present an attractive opportunity for businesses seeking a favourable tax regime, streamlined operations and a supportive investment environment.

Where is it?

Here’s a list of the top free zone areas in Dubai:

Freehold Vs Free Zone – Final Thoughts

Until the first quarter of 2018, if you were looking to start a business in Dubai in a freehold area, you were required to partner with a UAE national, in which case the UAE national would own a maximum of 51% of the shares while you hold the remaining 49%.

Recent changes to the law allow foreign nationals to fully own businesses in most sectors, with the exception of security and defence activities, military-related activities, telecommunications, banks, currency exchange, financing, insurance and banknote or coin production.

On the other hand, freehold areas provide the most flexibility for property ownership. Off-plan investments in these areas can be incredibly profitable due to lower initial costs and the potential for substantial returns.

All in all, the optimal choice between freehold and free zone depends on specific investment objectives and the desired level of control.

Difference between Freezone and Freehold Areas Dubai
The decision between freehold or free zone is dependent on many factors

FAQs About Freezone or Freehold Property Areas in Dubai

What is the difference between freehold and freezone?

Dubai offers both freehold and free zone options for investment. Freehold properties allow foreigners to own real estate in designated areas without restrictions on business activities. Free zones provide 100% foreign ownership for businesses in most sectors.

What are the disadvantages of free zones in Dubai?

While Dubai free zones offer numerous benefits, there are also some drawbacks to consider:

  • Geographical restrictions
  • Activity restrictions
  • Higher cost
  • Limited market access
  • Regulatory compliance

What is the freehold property zone in Dubai?

Freehold property zones in Dubai are designated areas where foreign investors can fully own real estate. This means they have complete ownership rights, including buying, selling, renting or leasing the property.

Can a freezone company own property in Dubai?

No, a free zone company cannot directly own property in Dubai. Free zone companies are restricted to operating within the designated free zone boundaries. They cannot own assets outside the free zone, including real estate.

If a free zone company needs to own property for business, it can do so through a mainland company. A mainland company is a UAE-based entity that can own property and conduct business throughout the UAE. The free zone company can either set up a subsidiary mainland company or appoint a local agent to handle property ownership.

Which are the popular freehold areas in Dubai?

There’s a complete list of freehold areas in Dubai. However, the popular ones are:

  • Barsha Heights
  • Arjan
  • Bluewater Island
  • Downtown Dubai
  • Dubai Marina
  • Palm Jumeirah
  • JLT
  • The Greens
  • The Views
  • JVC
  • DAMAC Hills 2
  • Arabian Ranches
  • The Springs
  • The Meadows
List of freehold areas in Dubai
Here’s a complete list of freehold areas in Dubai

This concludes our guide to Dubai’s freehold vs free zone areas. If you want to set up a business in the city, it’s essential to understand the requirements for opening an office in Dubai freezones.

Business persons looking for areas to buy or rent an office in Dubai can consider Business Bay, JLT, DSO and Downtown Dubai. These purpose-built offices feature various facilities and amenities to ensure smooth business operations.

For more information on freehold and free zone areas, stay tuned to MyBayut!

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