Laws and Rules for foreigners buying property in the UAE – Guest Post

Laws and Rules for foreigners buying property

The United Arab Emirates (UAE) is an undisputed hotbed for real estate investment in recent years. With its booming economy, modern infrastructure, and favorable tax laws, it’s no wonder that foreign investors are flocking to the country to buy luxury property in Dubai. However, before you invest in UAE real estate, it’s important to understand the laws and rules surrounding foreign ownership. In this blog, we’ll go over everything you need to know about buying property in the UAE as a foreigner.

Foreign ownership regulations in the UAE

The UAE comprises seven emirates, each with its own real estate regulations. However, the federal government has established overarching laws and regulations that apply to all emirates. One of the most important regulations to know is that foreign ownership is limited to specific areas designated as freehold areas.

Freehold areas in the UAE

Freehold areas are designated zones where non-UAE citizens can purchase property with full ownership rights. These areas are usually located in major cities and tourist destinations and are often developed specifically for foreign buyers. Some of the most popular freehold areas in the UAE include:

  • Dubai Marina
  • Palm Jumeirah
  • Downtown Dubai
  • Emirates Hills
  • Abu Dhabi Corniche
  • Saadiyat Island
  • Al Reef

These areas offer a range of properties, from luxury villas to high-rise apartments, and are popular with foreign investors looking to buy a second home or rental property.

Types of property ownership in the UAE

In the UAE, property ownership can be segregated into two forms, namely freehold and leasehold.

Freehold ownership includes granting the owner full ownership rights over the property, which implies that the owner has the right to sell, lease, or mortgage the property. This type of ownership is only available in designated freehold areas.

Leasehold ownership is different from freehold ownership. In this, the owner the right to use the property for a set period of time, usually 99 years. While the owner has the freedom to use the property and make modifications as per their discretion, they do not have full ownership rights and cannot sell the property without the landlord’s consent.

Buying property in the UAE as a foreigner

Foreigners looking to buy property in the UAE must have a valid residency visa. With a residency visa, you will be able to purchase property in the country. Once you have a residency visa, buying property is relatively straightforward.

Here are the steps involved in buying property in the UAE as a foreigner:

Find a property

Start by searching for properties in designated freehold areas. You can collaborate with a real estate agent or search online for properties that meet your needs and budget.

Make an offer

Once you’ve found a property you’re interested in, you can make an offer to the seller. If the seller accepts your offer, you must sign a memorandum of understanding and pay a deposit to secure the property.

Conduct due diligence

Before purchasing, it’s important to conduct due diligence on the property. This may involve hiring a lawyer to review the contract and ensure that all necessary permits and approvals are in place. 

Transfer ownership

Once due diligence is complete and all payments have been made, the property can be transferred into your name. This typically involves signing the sale and purchase agreement and registering the property with the Dubai Land Department.

Fees and taxes

When buying a property in the UAE, there are several fees and taxes that buyers should be aware of:

  • Registration Fees: Registration fees in Dubai are 4% of the property’s purchase price. This fee is split between the buyer and the seller, with each party paying 2% of the purchase price.
  • Real Estate Agent’s Fees: Real estate agent fees in the UAE are typically 2% of the purchase price. However, some agents may charge more or less depending on the property and services.
  • Mortgage Fees: If you are obtaining a mortgage to finance your property purchase, several fees are associated with this process, including a mortgage registration fee of 0.25% of the loan amount and a mortgage processing fee of up to 1% the loan amount.
  • Transfer Fees: Transfer fees in Dubai are 4% of the property’s purchase price. This fee is typically paid by the buyer.
  • Value Added Tax (VAT): VAT is a tax that is levied on most goods and services in the UAE, including real estate. The current rate of VAT in the UAE is 5%, payable on the property’s purchase price.
  • Service Charges: Service charges are fees paid to the property management company for the maintenance and upkeep of the common areas of the building or development. These fees vary depending on the property and the services provided.
  • Municipality Fees: Municipality fees are charged by the local government for services such as waste collection and street cleaning. These fees vary depending on the location and size of the property.

It is important to note that fees and taxes may vary depending on the property’s emirate. Buyers should consult a qualified real estate agent or legal professional to understand their property purchase’s specific fees and taxes.