With the introduction of the 10-year visa law and Expo 2020 fast approaching, a lot of people are looking to own property in Dubai. The Dubai real estate market is seeing continuous growth with the number of developments under construction around the city resulting in plenty of property investment opportunities. If you are a first-time investor in the Dubai property market trying to figure out the difference between a freehold property and free zone areas in Dubai, this article is for you!
Free zone Areas vs Freehold property
If you want to be a business owner or an investor looking to invest in Dubai’s property market, you should make yourself aware of the legalities that surround free zone and freehold areas in Dubai, as they will both inform where you can invest or set up your business.
dubai’s FREE zones
Free zone areas aka free trade zones in Dubai, are designated business zones that exempt the companies operating in them from taxation. These areas are exclusively used for business and don’t have any residential properties. Setting up business in a free trade zone is perfect for foreign companies and business owners that have the bulk of their business outside the UAE, but are looking to use the UAE for regional manufacturing or as a distribution base. Free trade zones in Dubai have been designed to encourage foreign investment in Dubai, as its tax exemption allows for a lucrative business environment for the registered companies in the Dubai free zone. Business owners who set up their business in a free trade zone have 100% ownership of the business.
There are currently 24 free zones operating in Dubai, with the popular ones being Dubai Multi Commodities Centre (DMCC) and Jebel Ali Free Zone (JAFZA) which is also one of the oldest free trade zones in Dubai.
Dubai’s freehold areas are locations where non-GCC nationals can own properties. Purchasing a property in a freehold area allows a buyer ownership of the land and the housing unit on the property. Once a buyer has purchased any freehold property, they are free to sell, lease or live on the property. The buyer of a freehold property doesn’t need to be a resident of the UAE, foreign nationals can purchase land in the freehold areas in Dubai.
The decree to buy property in Dubai on a freehold basis was passed in 2002 by His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President & Prime Minister of the UAE and Ruler of Dubai. When you purchase a property in any of the freehold areas in Dubai, you have registered the buyer’s name with the Dubai Land Department (DLD) as the ‘landowner’ – this grants you the 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 stays in the same family.
Currently, there are 23 neighbourhoods which have been designated as freehold location in Dubai, with most popular freehold areas in Dubai being Dubai Marina, Downtown Dubai and Jumeirah Village Circle (JVC).
Which one should you choose?
The choice between freehold and free zones in Dubai all depend on the purpose of your investment or the amount of control you want as a business owner. Until the first quarter of 2018, if you were looking to start a business in Dubai, in a freehold area you were required you 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%. However, with the announcement of the new company laws in the UAE foreign investors can now own 100% of the companies outside of the free zones in the UAE.
Until the new law comes into effect, to have 100% of the ownership of any business in Dubai, foreign investors can set up businesses in Dubai’s free zones, but this limits the possibility of expansion, as companies in Dubai free zone are only allowed to operate within the free zone areas in Dubai.
If you are looking to own property in Dubai to live in or sell at a profit, investing in Dubai’s freehold areas is the way to go. Off-plan investments can be a great investment opportunity as prices tend to be lower, offering a higher return on investment.
We hope you find this article helpful. If you did, you may also want to know the difference between freehold and leasehold properties. Nevertheless, if you are looking to buy property in Dubai then check out our Q1 real estate market report for Dubai to find out about the trending areas in the Dubai property market. For more interesting tips, stay tuned to the UAE’s number one real estate blog – MyBayut.