UAE property law: Rules and processes foreign buyers need to know

More and more UAE residents are choosing to invest in property in the country, so it is essential for buyers to know the differences in laws for foreigners and Emiratis.

For expatriates, buying property in the UAE is a transparent and straightforward process, said Robert Villalobos, head of brokerage at Engel & Volkers Middle East, but it’s important to understand the key rules and costs involved before making any long-term decisions.

The National spoke to experts in Dubai and Abu Dhabi to understand how regulations can impact investments.

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Can foreign buyers purchase property anywhere they like in the UAE?

In Dubai, property ownership is split into two structures: leasehold and freehold. Expatriates are only able to buy in designated freehold zones, which includes prominent neighbourhoods such as Palm Jumeirah, JBR, Downtown Dubai, Dubai Creek Harbour, Arabian Ranches, Dubai Hills Estate and Dubai Marina.

"There are more than 70 designated freehold areas across the emirate, allowing foreigners to buy property in many of Dubai’s most sought-after communities," said Mr Villalobos.

"The variety means expats can choose between waterfront apartments, golf course neighbourhoods, family-friendly suburbs, and urban lifestyle hubs, all with full ownership rights."

What are the differences between leasehold and freehold?

In simple terms, freehold means you have full ownership of both the property and the land it sits on, Mr Villalobos explains. "There’s no expiry date on that ownership, which gives you greater control; you can live in it, rent it out, sell it, or pass it on without restriction.

"Leasehold, on the other hand, gives you the right to occupy and use the property for a fixed term, typically anywhere from 30 to 99 years. You don’t own the land, it belongs to the freeholder, which is usually the government or a master developer."

When that fixed term ends, ownership reverts back to the freeholder, unless the lease is renewed.

How do the rules differ across the Emirates?

Ben Crompton, managing partner of Abu Dhabi-based property brokerage Crompton Partners, said each emirates' laws is unique but broadly similar in that they're mostly governed by contract law.

"Contract law is fundamental because the binding document for the transfer process of real estate is the memorandum of understanding between the buyer and seller," he explained.

"In Dubai, they have more specific contracts – the MOU is called a Form F."

What is the process in Abu Dhabi?

"The first thing to note is that there are two different sets of legal jurisdictions regarding property in Abu Dhabi," Mr Crompton explained. One applies to Reem Island and Maryah Island and is under the Abu Dhabi Global Market (ADGM) law, while the second applies to the rest of Abu Dhabi, which is under the Abu Dhabi Real Estate Centre (ADREC) law.

"These two locations have different laws, so you need to apply the correct one when depending on which area you are buying/selling property in."

Secondly, regarding sales and purchases of property in Abu Dhabi, "the law is relatively silent", he added. "A lot of the sales law is governed by process, and also contract law."

In Abu Dhabi, although the ADGM has a standard form of contract, ADREC is also bringing one out soon. "However a lot of the terms of the transfer are still dictated by whoever is doing the conveyancing, which, for the most part are still real estate brokers," said Mr Crompton.

Abu Dhabi also has three types of ownership. There is freehold, which again is full ownership. Then there is usufruct, which is a 99-year lease, and Musataha, which is a 49-year lease renewable for 49 years.

"Usufruct is a standard lease of a property and Musataha is a lease of land with a right to build and lease the property that you build on that land," added Mr Crompton.

Can foreigners buy anywhere in Abu Dhabi?

There are laws surrounding who can buy what types of property, in what location and what types of legal ownership people can obtain, said Mr Crompton.

Expats can own property in the investment zones, created specifically by government regulation, including places like Sadiyaat Island, Reem Island, Maryah Island, Yas Island, Jubail, Raha Beach, Al Reef and a few others.

"Other areas are reserved for UAE nationals only," he added.

What additional fees do foreign buyers need to be aware of?

Mr Villalobos said a common misconception among foreign buyers in the UAE is that the price they agree with the seller is the only cost they need to consider.

"While there’s no income or property tax in Dubai, buyers should budget for costs such as the Dubai Land Department transfer fee of 4 per cent of the purchase price, a broker’s commission of 2 per cent, plus VAT, and annual service charges for the upkeep of communal areas, facilities, and security."

Do you need to be a UAE resident to buy property or be here in person?

"The simple answer to both is no," said Mr Villalobos. "You can buy a property as a non-resident, and there are straightforward procedures in place to make a remote purchase possible."

In Dubai, this includes digitally completing the Unified Form F, which is the contract between buyer and seller, and using a power of attorney for the transfer of ownership.

Is buying a property in the UAE worth it?

Despite the additional costs for foreigners, buying property in the UAE can be a "compelling option, he said,

"Mortgage interest rates for expats are highly competitive, and in many cases, monthly repayments are lower than what you would pay in rent for a comparable home."

What advice would you give to anyone new to the UAE considering buying property right now?

Mr Villalobos said all potential buyers should research the location and the buying process. "Each project and community in the UAE offers a different lifestyle, set of amenities and long-term benefits. Once you’ve narrowed down your preferences, engage with a reputable and established brokerage that can guide you through everything from securing a mortgage and arranging initial viewings to negotiating offers, handling contracts and completing the transfer of ownership."

Mr Crompton said, from a legal point of view, since real estate agents still co-ordinate property transfer in Abu Dhabi – and lawyers are rarely involved – it's important to get a broker with plenty of experience and who has a strong MOU.

"Make sure you read the MOU because it will govern the process of transfer between the buyer and seller."