Freehold and Leasehold Property Ownership in Dubai – The difference
Prospective homeowners and investors must know the differences between leasehold and freehold property ownership in Dubai.
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.
When considering leasehold or freehold property, it’s essential to consider the differences between these ownership types.
Freehold is where you purchase the property in full (whether utilising a mortgage or in cash), so you own the property itself and the land that it is on while Leasehold is where you purchase the rights for the property for a limited period of time, normally for about 99 years.
Leasehold property is uncommon in Dubai, but there are a few areas where you can purchase leasehold property for example Silicon Oasis and Green Community.
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.
Leasehold property 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.
Freehold property ownership in Dubai
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.
Where can I buy Leasehold Property 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 or Freehold: Which type of property ownership in Dubai is right for you?
When deciding between freehold or leasehold property, 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.
When looking at buying leasehold or freehold property, think about your long-term use of the property.
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 or freehold property. Other factors include your long-term needs, property use and budget. Your decision between freehold or leasehold will also need to consider the property itself and the surrounding area.
Freehold and leasehold are two forms of legal property ownership available to buyers wanting to buy in the Dubai. It is a substantial financial commitment so it’s important to understand the difference between freehold and leasehold property before making an informed decision:
Difference between Freehold and Leasehold property in Dubai
|1.||The owner has full ownership and control over the property and doesn’t require permission before making any renovations or minor changes. If it’s the facade of the property, then permission is needed from the respective developer.
|This type of property ownership only allows the buyer rights to the units for a long-term and not the land itself. If the resident would like to remodel, repair, alter or do anything else, permission is required from the freeholder.|
|2.||Freehold property ownership in Dubai allows the owner to have complete ownership over the home in addition to the land that the property stands on. Dubai Land Department (DLD) registers the buyer’s name as ‘landowner’ in the registry as well as grants a title deed for the property||Buyers can only buy properties from designated freehold areas in Dubai. They have limited options.
|3.||The freehold property owners are complete liable and responsible on a maintenance basis and structural repairs.
|Owners of leasehold properties have limited liability when it comes to property maintenance. It is the landlord’s responsibility to pay for repairs.
|4.||Expats in Dubai are not permitted to own properties on freehold in non-designated areas but can buy freehold properties in specific freehold areas in Dubai such as Dubai Hills Estate, Downtown Dubai, Arabian Ranches and Dubai Marina.
|Purchasing properties on leasehold offers expats (buyers), more options in terms of price and area selection.
|5.||Freehold property owners and their families are entitled to renewable UAE residence visas if the value of the property is above AED 1 million.
|Once the lease is over, the property goes back to its freeholder. However, the lease can be renewed at the end of the term once it expires.
|6.||It can be inherited by the family if the owner passes away with or without a presence of a will and can be sold or rented out at the owner’s own discretion
|It can’t be inherited by the family, be sold or rented at the leaseholder discretion.|
|7.||Owners of freehold property benefit from high return-on-investment on their property due to the booming of the Real Estate Market in Dubai.
|The average sales price for leasehold properties might be somewhat lower than freehold properties.
Out of all the seven emirates in the UAE, Dubai was the first to involve itself with freehold properties. In 2001, the government allowed expatriates to get a 99 year lease of Dubai freehold properties.
It was in 2002 the government issued the Freehold Decree, which permitted foreign nationals within minimum 21 years of age, to buy, sell, lease and rent properties on freehold ownership in specially designated areas around Dubai. This development prompted Real Estate investors and foreigners to take interest in the Dubai Real Estate market.
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