Lawyers who have seen the latest draft of the Dubai Property Law are impressed. Dubai residents looking to buy a new home will be granted outright ownership of both the property and the land. There will be no back-peddling from freehold to leasehold.
The new Dubai Property Law will mean that for the first time foreigners will be allowed to register properties under own names in the Dubai Land Department. And if the latter conjures up images of Dickensian title deeds think again, this department offers the very latest in electronic land and property title registration.
Previously buyers held a contract of sale from the developer which allowed transfer of ownership only through the developer, with an agreement in the contract that a full and unencumbered freehold title would be granted on the property as soon as it became available.
The new law means that this moment has arrived and that foreign owners can expect to have their title deeds available for collection in due course; not that their legal entitlement to sell the property has ever been in doubt.
Mortgage market impact
Indeed, the biggest practical impact may be felt in the local mortgage market rather than the re-sale market. Some international banks, notably Standard Chartered Bank, have not been willing to enter the mortgage market due to the legal uncertainties surrounding ownership rights, duties and obligations.
Now presumably Standard Chartered Bank and others will enter the mortgage market and begin to force down the cost of mortgages with aggressive pricing and new products. It has to be said that Amlak Finance's 7.5% mortgage rate is already significantly higher than RAKbank at 6.9% but there is room for lower rates particularly for introductory discounts.
Generally the lower the cost of money in a housing market, the higher house prices will move. Part of the reason for the very high prices seen in many global real estate markets is the low cost of funds at present. Thus cheaper mortgages in Dubai should mean higher prices here too.
Leading Dubai estate agents Asteco are on the record as saying that the new law will bring forward an avalanche of new buyers, many of whom already have mortgages arranged but just want the law in place before they go ahead and buy.
The 40-article draft law covers five broad areas: title and ownership of title; areas nationals and foreigners can own; granting the right to own units in an apartment or condominium; long-term leases; and mortgages. The law also gives UAE and GCC nationals the unhindered right to buy property anywhere in Dubai.
A sub-clause allows foreigners to own properties with 'The Ruler's consent' which will cover properties of the major freehold developers: Emaar, Nakheel and Dubai Properties. Foreigners may also request special permission from The Ruler to buy properties outside of the designated areas.
Another article formalizes long-term leases and stipulates that leases of longer than five years have to be registered with the Dubai Land Department.