Great Properties considers effect of property laws on UAE real estate market

The property laws and amendments that have been passed in the UAE over the past few years are a definite indication of the country's dedication to becoming a destination of choice for investors throughout the world, said Great Properties Vice President, Mohammed Al Zarah. 'The success of any property industry is dependent upon a clear legal framework that provides appropriate levels of protection for all parties involved.'

An example of these new laws is the Escrow (Trust) Account Law (Law No. 8 of 2007), one of Dubai's most recently passed property laws, which states that every development must have its own escrow account, which will only be opened subject to the developer meeting certain conditions, and that these escrow accounts must be managed by approved financial or banking institutions.

The law was drawn up specifically to improve the confidence of real estate investors from around the globe by ensuring that developers can no longer launch a project and collect deposits without guaranteeing that the funds so gathered will be used for the stated purpose(s).

According to Al Zarah, 'Such legislation is in the best interests of everybody concerned: investors are assured that their funds are not being mismanaged, developers are protected against unexpected market conditions, and the emirate promotes itself, and the UAE in general, as an attractive and reliable investment destination.'

And Dubai is not the only emirate that has been improving its regulatory framework for real estate over the past few years; Abu Dhabi only enacted its first property law in 2005, with a number of other laws and amendments passed since then. In the short time that the property ownership and registration laws have been in place in the emirate, numerous development and infrastructure projects have been launched within the emirate and its real estate market is booming.

Regarding property ownership rights in the UAE, Al Zarah explains, 'The basic legal framework regarding property ownership and registration is very similar across most of the emirates: UAE nationals and legal entities wholly owned by them can own property rights in all areas of the UAE; GCC nationals have the same property ownership rights as UAE nationals in all emirates; and foreign nationals have more restricted rights, the specifics of which depend on the particular emirate.'

'In Dubai, for example,' he continues, 'foreign individuals and companies can own a freehold title, a long lease or a usufruct right of up to 99 years in designated areas, and in Ras Al Khaimah foreign nationals may hold long leases, or own property in specific investment projects by establishing a company in the Ras Al Khaimah Free Zone. In Sharjah, on the other hand, foreign nationals may not own property at all, although they may own a leasehold right of up to 25 years.'

In both Abu Dhabi and Umm Al Quwain foreign nationals and GCC nationals may hold (renewable) rights of usufruct for up to 99 years and a right of musataha for up to 50 years, and both may own units or floors in buildings in the Investment Zones (such as Abu Dhabi's Al Reem Island and Al Raha Beach), but unlike GCC nationals, foreign nationals may only own the 'surface rights' to land and not the underlying land itself. And in Ajman, an Emiri Decree may be issued permitting a foreign national to own real estate, although there are certain areas where non-nationals are not permitted ownership.

Fujairah is the only emirate with no real legal framework regarding property ownership, as it does not have much land suitable for development, and foreign nationals may not own property at all.

While there is still work to be done in order to clarify aspects of property ownership regulation in the UAE, in some emirates more than others, Al Zarah believes that the laws enacted over the last few years have improved investor confidence, as evidenced by the ongoing growth and expansion of the country's real estate market. And as the emirates continue to refine their laws, so investor confidence will continue to increase.