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Property Types in the UAE: Navigating Real Estate Investment

Posted by Abdul Razzaq on February 1, 2024
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Navigating the real estate market in the United Arab Emirates (UAE) involves understanding the various types of property ownership available to investors and residents. The UAE Civil Code outlines legal ownership categorically into freehold, Musataha, and usufruct rights, with specific laws governing long and short-term leases. This guide delves into each ownership type, providing essential insights for those looking to engage in the UAE’s real estate sector.

Freehold

Freehold ownership offers the most comprehensive rights to property, allowing owners indefinite possession. This type of ownership incurs a registration fee of 4% of the sale contract value or the property value, whichever is higher, payable to the Land Department. Typically, the involved parties share this fee, unless an alternative agreement is made.

Eligibility for Freehold Ownership:

Both UAE nationals and foreign nationals can own freehold properties, albeit foreigners are restricted to designated areas as specified by the government. This inclusivity promotes the UAE as an attractive destination for international investors and expatriates seeking long-term residency through property investment.

Musataha

Musataha grants an individual the right to construct or use someone else’s land. With a maximum term of 50 years, extendable for another 50, this right can be terminated by either party given a two-year notice. The DLD levies a registration fee of 1% of the total contract value on the beneficiary of Musataha.

Eligibility for Musataha:

Both UAE nationals and foreigners can acquire Musataha rights, subject to specific terms and conditions. This flexibility allows for diverse development projects by offering temporary rights to build or use land across the UAE.

Usufruct

Usufruct allows a tenant the right to use and benefit from a property owned by another, as long as the property remains in its original condition. Typically set for 50 years, the DLD registration fee for usufruct is 2% of the lease value.

Eligibility for Usufruct:

Similar to freehold and Musataha, usufruct rights are available to UAE nationals and foreign nationals under regulated terms and conditions, emphasizing the importance of understanding these agreements before engagement.

Long Leases (Leasehold)

Long-term leaseholds enable UAE and GCC nationals, and their wholly-owned companies, to lease properties for up to 99 years, particularly in designated areas for foreign nationals. The registration fee for these leases is 4% of the total rent value.

Eligibility for Leasehold:

Primarily available to UAE and GCC nationals, foreign nationals can also engage in long leases within specified zones, highlighting the UAE’s accommodating stance towards international real estate investment.

Short Leases

Short-term leases, capped at 10 years, create a personal right for the tenant and are regulated by the Real Estate Regulatory Authority (RERA). A 5% registration fee of the total lease value applies, with disputes managed by the Rent Dispute Settlement Centre.

Eligibility for Short Leases:

This type of lease is accessible to a wide range of individuals, including both residents and expatriates, facilitating temporary residential and commercial arrangements across the UAE.

Conclusion

Understanding the intricacies of property ownership in the UAE is crucial for anyone looking to navigate its real estate market effectively. From freehold properties offering indefinite ownership to temporary rights under Musataha and usufruct agreements, as well as the nuances of long and short-term leases, each ownership type caters to different needs and investment strategies. Awareness of the associated fees and eligibility criteria further equips potential buyers and tenants with the knowledge required to make informed decisions in the UAE’s dynamic real estate landscape.

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