All about leasehold property ownership in Dubai

• What is Leasehold Ownership
• Who Can Buy Leashold Properties
• Advantages of Leasehold Ownership
• Disadvantages of Leasehold Ownership
• FAQs

Dubai is a magnet for investors worldwide. And announcements of new projects almost daily are spoiling investors for choice when buying property in the city. However, unlike locals, as an expat, your options for owning a property are limited to freehold and leasehold basis. While both options have merits, this guide will focus on leasehold property ownership in Dubai and its pros and cons.

So, without further ado, let’s start with what is leasehold ownership and who can buy such property.

What is Leasehold Ownership?

Leasehold properties in Dubai offer a unique ownership structure. While you’ll own the building, the underlying land remains with the government or a private landlord.

This ownership comes with a fixed lease term, typically 99 years. However, this duration can vary depending on the developer and the property’s location. It’s important to remember that this lease dictates the timeframe during which you can enjoy the property. Once the duration lapses, the property rights will be transferred to the freehold owner.

Additionally, the laws for leasehold ownership in Dubai dictate that significant modifications to the building may be restricted and require approval from the landowner or governing authority.

Who can Buy Leasehold Property?

Expats in Dubai have the opportunity to purchase property through leasehold ownership. You will find the designated areas outlined by Regulation No. 3 of 2006. Popular locations for leasehold investment include Palm Jumeirah, The World Islands, Downtown Dubai and more, offering various options.

Interestingly, the buying process for both leasehold and freehold properties is similar. If you want to learn more about the regulations surrounding foreigners owning property in the city, read our blog on rules for foreigners buying property in the UAE. Here, you can find resources on how to buy property in Dubai and other emirates as an expat.

Now, let’s move on to the pros and cons of buying leasehold property in Dubai.

Pros of Buying Leasehold Properties

The advantages of buying leasehold properties in Dubai are:

Limited Liability

In a leasehold property, the landlord (lessor) is typically responsible for managing and financing maintenance and construction. This means lessees (buyers) have minimal financial burden for upkeep. However, with mutual agreement, lessees can undertake maintenance or repairs with prior permission from the landlord.

Lower Initial Cost

Since the lessee has limited property ownership, which is also time-restricted, the initial or upfront cost of buying a leasehold property is low.

Shared Maintenance

Leasehold communities often have a shared responsibility for maintaining common areas and amenities. This spreads the cost amongst residents, reducing the financial impact on individual homeowners.

Government Regulations

Leasehold ownership offers a layer of security through government regulations. These regulations establish guidelines for the development and management of the property. This can be particularly appealing to expat buyers unfamiliar with the local market.

However, it’s important to note that these regulations can also come with limitations, such as restrictions on modifications or potential future changes to fees associated with the lease.

Investment Opportunity

For investors seeking steady returns, some leasehold properties can be particularly attractive. Due to their often lower upfront cost and potentially high rental yields, these properties can generate a substantial income stream.

Flexible Options

Leasehold properties offer flexibility when it comes to ownership duration. Unlike freehold, where ownership is permanent, leaseholds come with predetermined lease periods.

Shorter leases can cater to temporary residents, while longer leases provide stability for those seeking a more permanent foothold in Dubai.

Cons of Buying Leasehold Properties

Here are some of the disadvantages of buying leasehold properties in Dubai:

Limited Control

Modifications in leasehold properties often require approval from the landowner or governing authority. This can limit your ability to personalise the space or make major changes that suit your needs.

Uncertainty

The fact that you don’t own the land can lead to uncertainty about the property’s future, especially if the landowner decides to change the terms or use of the land.

Potential for Disputes

While shared maintenance in leasehold developments can ease the financial burden on individual homeowners, it can also be a source of friction. Disagreements may arise among residents regarding the quality or cost of maintenance or even with the landowner over service charges or management decisions.

Also, lessees are not permitted to sublet their properties.

FAQs About Leasehold Property Ownership in Dubai

Can I convert a leasehold property into a freehold one?

Converting a leasehold property to a freehold property is feasible, although it requires a significant investment of time and money. Nonetheless, it can be done.

What’s the difference between a leasehold and a freehold property?

There are a few main differences between freehold and leasehold property in Dubai. Freehold ownership grants you complete property ownership, including the land. This means you can freely sell, rent or occupy the property and even pass it down to your heirs.

On the other hand, when acquiring a leasehold property, you only have the property rights for a limited duration, typically no longer than 99 years. Additionally, you don’t own the land, and most major property rights remain with the landowner.

Curious about the distinction between usufruct and lease? Our comprehensive guide on usufruct vs lease offers a clear explanation of these two legal terms.

How to extend leasehold property in Dubai after expiration?

If you want to extend leasehold ownership, here are the general steps to follow:

• Review the lease agreement
• Contact the landlord
• Negotiate new terms
• Create a new lease agreement
• Register the new lease agreement

Where can I buy a leasehold property in Dubai?

Expats can buy leasehold property areas in designated areas of Dubai. The most popular areas to buy leasehold properties in Dubai are Jebel Ali, Al Jaddaf, The World Islands and Ras al Khor.

How can we register leasehold property in Dubai?

In Dubai, leasehold property registration with DLD (Dubai Land Department) is a crucial step in establishing the legal status of the lease agreement. The post also includes the required documents for leasehold property ownership in Dubai.

And with this, we reach the end of our guide on leasehold property ownership in Dubai. If this has got you thinking about owning a property in the city, take a closer look at the benefits of buying property in Dubai.

However, those who want to invest in a freehold area and enjoy 100% ownership of the property can learn more about the freehold property law in Dubai to make an informed decision.

For more information on how to invest in Dubai real estate, stay tuned to MyBayut!