Understanding Freehold vs. Free Zones in Dubai

• Difference Between Free Zones and Freehold Areas in Dubai
• Pros of Freehold Areas in Dubai
• Benefits of Free Zone Property in Dubai
• Final Thoughts

Dubai is an ideal place to invest, whether it’s business or property. From a stunning selection of houses to favourable laws promoting business activities, there’s a large scope to grow professionally and personally. Keeping this thought in mind, MyBayut has drawn up a detailed account of Dubai’s freehold vs free zone areas – where to invest in property or set up a business.

Difference between Free Zones and Freehold Areas in Dubai

Ownership

Freehold areas allow non-GCC nationals to fully own properties, as Law No. 7 of 2006 outlines. This includes residential properties but excludes commercial ones. Freehold property owners enjoy complete rights, such as sale, lease and inheritance.

Free zone areas are designed to attract foreign investment. While investors can establish businesses without local partners, they cannot own property within the zone. Instead, they lease properties for up to 99 years.

Both freehold and freezone areas are subject to specific regulations that govern property transactions, ownership rights and business activities within their respective jurisdictions.

Property Rights and Inheritance

While drawing a comparison between free zones and freehold areas in Dubai, it is essential to consider property rights and inheritance.

The Dubai Land Department (DLD) safeguards property rights in freehold areas. They maintain a public property register and record all transactions. Freehold owners can sell, lease or bequeath their properties.

In free zone areas, the respective free zone authority oversees property rights. While they also maintain a public register, their regulations govern property ownership and inheritance.

Regulatory Framework

Freehold and free zone areas in Dubai operate under distinct regulatory frameworks. The DLD governs the freehold areas to regulate the real estate market, set transaction rules and ensure property registration.

On the other hand, free zone areas are subject to the regulations of their respective authorities. These authorities oversee business activities, property ownership and taxation within their zones to promote foreign investment.

Advantages of Freehold Areas in Dubai

Understanding the difference between free zones and freehold areas in Dubai is not enough to make a decision. The smart thing would be to weigh the pros and cons as well.

Keeping this in mind, here are the advantages of freehold areas in Dubai.

Full Ownership: Investors enjoy complete control over their property, including the right to sell, lease or reside there. Their names are officially registered with the DLD. Read Dubai’s freehold property ownership law to learn more.

Return on Investment: Dubai’s strong demand for residential and commercial properties makes freehold investments attractive. The property values are expected to appreciate over time, offering the potential for significant returns.

Versatility: Freehold properties provide flexibility, allowing investors to choose between residential and commercial options, diversifying their portfolios.

Advantages of Free Zone Areas in Dubai

The benefits of free zone property in Dubai ensure a compelling environment for foreign businesses. For starters:

Tax Benefits: Companies enjoy exemptions from corporate, income and customs taxes, leading to lower operating costs and higher profitability.

Ease of Doing Business: Streamlined registration, visa processes and comprehensive support services facilitate efficient business operations.

Investment Incentives: Free zones provide a range of incentives, including 100% foreign ownership and access to a supportive business ecosystem.

Overall, Dubai’s free zones present an attractive opportunity for businesses seeking a favourable tax regime, streamlined operations and a supportive investment environment.

Where is it?

Here’s a list of the top free zone areas in Dubai:

• Jebel Ali Free Zone Authority (JAFZA)
• Dubai Airport Free Zone Authority (DAFZA)
• DAFZA Industrial Park
• Dubai Silicon Oasis
• Dubai Healthcare City
• International Humanitarian City
• Dubai World Trade Centre
• Dubai Maritime City

Freehold Vs Free Zone – Final Thoughts

Until the first quarter of 2018, if you were looking to start a business in Dubai in a freehold area, you were required to partner with a UAE national, in which case the UAE national would own a maximum of 51% of the shares while you hold the remaining 49%.

Recent changes to the law allow foreign nationals to fully own businesses in most sectors, with the exception of security and defence activities, military-related activities, telecommunications, banks, currency exchange, financing, insurance and banknote or coin production.

On the other hand, freehold areas provide the most flexibility for property ownership. Off-plan investments in these areas can be incredibly profitable due to lower initial costs and the potential for substantial returns.

All in all, the optimal choice between freehold and free zone depends on specific investment objectives and the desired level of control.

If a free zone company needs to own property for business, it can do so through a mainland company. A mainland company is a UAE-based entity that can own property and conduct business throughout the UAE. The free zone company can either set up a subsidiary mainland company or appoint a local agent to handle property ownership.

This concludes our guide to Dubai’s freehold vs free zone areas.