These new UAE policies are making it easier to enter the property market

A series of recent initiatives unveiled by the UAE are set to improve the country's property sector and attract more investment to a market that has already seen major growth last year.

Earlier this month, the Dubai Land Department launched a smart rental index with a classification and a rating system from one to five stars for residential buildings, while the UAE Central Bank instructed banks to stop financing the Dubai Land Department registration fees and real estate broker fees starting from February 1.

Dubai also allowed private property owners of all nationalities on the Sheikh Zayed Road and Al Jaddaf areas to convert their ownership to freehold status, in a move aimed at boosting the city's position as a major centre for real estate investment.

As part of the initiative, 457 plots will be eligible for conversion to freehold – 128 on Sheikh Zayed Road, from the Trade Centre roundabout to the Dubai Canal, and 329 plots in Al Jaddaf, according to an announcement by Dubai Land Department last week.

“The new policies, which balance opportunity and oversight, collectively foster an environment conducive to sustainable growth,” said Siraj Ahmed, partner, strategy and consulting at Cavendish Maxwell.

“The smart rental index and freehold status initiatives offer new prospects for investors and developers, while the central bank’s oversight mitigates financial risks to the banks, ensuring the market remains stable and resilient.”

Sheikh Zayed Road is expected to undergo a “dynamic transformation” after the freehold announcement as vacant plots will be developed and old properties will be redeveloped to boost the potential of the corridor, he added.

“This stretch on Sheikh Zayed Road has some relatively older buildings dating back to the 1970s up to the early 2000s, each offering varied conditions, experiences, and levels of performance. With the introduction of freehold status … we anticipate a dynamic transformation along the corridor. This could include a mix of new developments, redevelopments, building upgrades, and properties being offered for sale.”

Dubai growth

The initiatives come as Dubai’s property market continues to perform strongly amid government initiatives such as residency permits for retired and remote workers as well as the expansion of the 10-year golden visa programme and overall growth in the UAE’s economy on diversification efforts.

Dubai recorded real estate deals worth Dh761 billion last year, up 20 per cent compared to 2023, with the total number of transactions for the one year increasing by 36 per cent to reach 226,000, according to the latest data provided by the Dubai media office.

It also achieved 2.78 million procedures last year, including real estate transactions and rental agreements, the highest in its history. The number of procedures represents a 17 per cent increase compared to 2023.

During the third quarter, average prices in the Dubai residential market rose close to 20 per cent year-on-year, underpinned by a 19 per cent rise in average apartment prices and a 23 per cent increase in average villa prices, according to a report from CBRE.

The freehold announcement for Sheikh Zayed Road “could help expand the available panel of investment opportunities in the city, thus making the Dubai market even more attractive,” said Ray Verma, a luxury broker for Eden Realty.

The smart rental index, on the other hand, “could help make the market more transparent and help tenants and landlords in their decision-making and pricing respectively. At the same time, the increased transparency could help drive more investments into the real estate market as investors can more easily evaluate the returns for their investments in different areas of the city.”

Meanwhile, the Central Bank’s directive to limit banks’ ability to finance DLD and broker fees will increase upfront costs for buyers, “potentially making it more difficult for small investors to acquire real estate units,” Mr Verma added.

“This could affect …..mortgage volumes in the short term as buyers reassess their financial capacity. This could potentially have an impact on local banks’ revenue if mortgages decrease.”

The home buyers have to set aside a larger down payment after the UAE Central Bank’s directive. In addition to the required 20 per cent or 30 per cent property down payment, buyers will need liquid funds to cover the 4 per cent DLD fee and 2 per cent agent fee.

In August, Abu Dhabi also rolled out the emirate's first residential rental index, aimed at providing indicative rental values for both tenants and landlords across different areas of the capital to boost transparency in the property market.

Last week, Etihad Rail also announced a high-speed passenger rail service between Abu Dhabi and Dubai. The new service is set to cut the journey time between the two emirates to 30 minutes and help people move around freely as population and new real estate projects continue to rise across the Emirates.

Recent initiatives rolled out to support property market in UAE

1. Dubai’s smart rental index, with classification and a rating system from one to five stars for residential buildings, is based on more than 60 criteria including its location, sustainability factors, building security, age and amenities. This was announced on January 2

2. An initiative to allow private property owners of all nationalities on the Sheikh Zayed Road and Al Jaddaf areas to convert their ownership to freehold status. This was announced on January 19

3. A directive from the UAE Central Bank to stop lenders from financing the Dubai Land Department registration fees and real estate broker fees for home buyers starting from February 1

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