- Difference between leasehold and freehold properties
- Leasehold property ownership
- Freehold property ownership
- Should you buy leasehold or freehold property?
Are you an expat or foreign investor planning to buy property in Dubai? Before you take the plunge and put down your hard-earned money towards a home, it’s important to understand the different types of property ownership in Dubai for foreigners. Prospective homeowners and investors must know the differences between leasehold vs freehold ownership in Dubai to make a well-informed decision about their purchase.
Learn more about property ownership rules in Dubai, the pros and cons of the different ownership categories and popular areas for such properties.
What is the difference between leasehold vs 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 while the decree for buying property in Dubai on a freehold basis was passed in 2002.
The difference between freehold and leasehold property in Dubai lies in the rights that are granted to the buyer. Here’s a glance at these two types of property ownership in Dubai:
- Leasehold ownership: If a person buys property on a leasehold basis, they will be granted rights of the property for a fixed term, which is a maximum of 99 years. However, they will not own the land the property is constructed on; the ultimate ownership for the land goes back to the freeholder.
- Freehold ownership: If someone buys property on a freehold basis, they 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.
Now that you’re aware of the basic difference between these two types of property ownership in Dubai, let’s take a closer look at the pros and cons of leasehold vs freehold homes.
Leasehold ownership in Dubai
Buying leasehold property essentially means buying 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 certain cases. This form of property ownership in Dubai only grants the buyer rights to the unit, not the land it is built on.
At the end of the lease period, ownership of the purchased property unit reverts to the freeholder.
Pros of buying leasehold property in Dubai
- With leasehold property ownership, the lease can be renewed at the end of the term, so the leaseholder can continue to live in the house.
- When owning a leasehold property in Dubai, the leaseholder will face limited liability when it comes to repairs. Most of the time, it is the freehold owner’s responsibility to take care of repairs, especially if they impact the structure of the property.
Cons of buying leasehold property in Dubai
- One of the disadvantages of leasehold ownership in Dubai is that any improvements to the property such as remodeling, alterations or renovation typically require written approval from the freehold owner.
- Leaseholders may also face other restrictions such as when it comes subleasing the property or owning pets.
Where can you purchase leasehold properties in Dubai?
Leasehold properties are not very common as most buyers and investors prefer the complete ownership offered by freehold properties. However, prospective buyers can find such properties in areas including Dubai Silicon Oasis and Green Community. It’s also possible to purchase properties on a leasehold basis in the other designated areas for foreign ownership.
Freehold Property Ownership
This form of property ownership gives the buyer absolute ownership over both, the unit and the land that it stands on, with no 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 a title deed for the property.
The freehold contract is applicable in perpetuity, and when the owner passes away, an heir can inherit it. So essentially, the property will stay in the same family.
Aside from expatriates, foreign nationals living abroad can also purchase ready or off-plan property on a freehold basis in the designated zones. However, it’s important to only buy freehold properties from government-approved real estate agents or developers.
Pros of buying freehold property in Dubai
- Buying freehold in Dubai will provide the owner with complete control over both the unit and the land. Thus, owners of freehold property in Dubai can make changes to the structure and renovate the property as they see fit, as long as it abides by the guidelines set by the developer.
- The freehold property will stay in the family and will pass on to an heir when the owner passes away.
- The owner can sell, lease or occupy their freehold property in Dubai at their discretion.
- The owner of freehold property in Dubai and their family will also be eligible for renewable UAE residence visas, provided they meet certain conditions. With the introduction of the long-term residency visas in the UAE, owners of freehold property can also be eligible for five and ten-year visas.
- Another one of the advantages of freehold ownership is the choice of properties available to prospective buyers. The designated areas in Dubai have a massive portfolio of freehold properties, catering to different budgets, tastes and requirements.
- Owners of freehold property can also benefit from high return-on-investment with apartments in International City yielding returns up to 9%!
Cons of buying freehold property in Dubai
- Freehold owners in Dubai will be responsible for the maintenance and upkeep of the property. For instance, if the owner has leased the property to a tenant, the foreigner will be responsible for any major repairs or maintenance.
Where can you buy freehold property in Dubai?
Buyers and investors interested in freehold ownership will have a large choice of properties to choose from. The freehold areas in Dubai are home to a variety of developments and projects, ranging from single apartment towers to villa and townhouse communities.
Freehold property is the most popular choice for foreign buyers and is 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-designated areas such as Jumeirah have also seen the development of certain freehold projects, such as City Walk and La Mer, expanding the choices for freehold buyers.
Leasehold vs Freehold: Which type of property ownership in Dubai is right for you?
When considering purchasing freehold vs leasehold, it is important to understand the legal rights and responsibilities for each type of ownership. The most prominent difference between freehold and leasehold ownership is the element 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.
However, in practical terms, 99 years is also a long time 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 vs freehold home.
Other factors to consider include your long-term needs, property use and budget. Your decision between freehold vs leasehold will also need to take into account the property itself and the surrounding area.
At the end of the day, both options have their perks. It comes down to what you need from your property investment. So do your due diligence and research to ensure you make the right decision!
The decision to buy a home in Dubai is a huge financial commitment and it’s important to make sure that you have sufficient funds for a down payment. Take a look at our tips to save for a down payment in Dubai.
It’s also a good idea to read up on the property ownership rules in the UAE for foreigners, and learn more about the laws in different emirates before you invest in a property.
Stay tuned to MyBayut for more articles on the UAE’s property market!