Dubai property law to come before a federal law

The Dubai Executive Council currently has a draft property law before it which is expected to legalize the freehold ownership of 'surface property' to expatriates in certain designated areas, and allow the registration of title with the Dubai Lands and Properties Department.

This was the message that Essam Al Tamimi, managing partner of leading local law firm Al Tamimi & Co presented to the Dubai Property Group this week. 'Surface property' presumably means villas rather than multiple-occupation property, though this is not yet clear.

Mr. Al Tamimi said that apart from the designated areas, the law would allow 99-year leasehold elsewhere in Dubai. There would also be later bylaws concerning rentals, common use areas, the secondary market and brokerage commissions.

At present the draft law is being circulated to developers and their legal advisers for feedback.

The news that the law has reached this stage in itself clears up some of the confusion surrounding property law. Clearly a federal property law is now a lesser priority, particularly following Abu Dhabi's lead in issuing its own property law.

However, the Dubai property law will take rights for foreigners a stage beyond the 99-year leases allowed in Abu Dhabi on two projects. But to be fair, the allowance of any sort of property rights to foreigners in Abu Dhabi is a major step as previously there were none.

For Dubai property the new law will be very good news. The development of the local mortgage market will receive a shot in the arm, as more banks will be prepared to lend and greater competition and market volume should lower the cost of mortgage borrowing.

There is also the intangible 'confidence' factor. The entrenchment of property rights for foreigners in local statute will be a convincing demonstration that the real estate sector in Dubai has moved to a world-class level of investor protection.

Investors are by nature cautious folk, and are bound to be encouraged by the legalization of their interests, and the fact that the Dubai Government has kept its promise to foreigners yet again.

The legislation therefore removes one significant barrier preventing the upward movement of Dubai property prices to world levels, although the supply of property now in the pipeline is bound to counteract any irrational exuberance.