Buying Real Estate in the UAE. Setting up a Company to Buy Property

Investments into the residential and commercial real estate property in the UAE is the profitable and reliable option; it attracts investors from different parts of the world. Even though the real estate property in the UAE can be purchased by a private person, in some cases, buying a real estate as the company has some sense. First of all, it is due to the additional privacy regarding ownership. Besides, the ownership via legal entity gives certain advantages regarding planning the issues of inheritance.

UAE real estate market

The UAE Civil Code provides for various types of real estate property ownership:

• Freehold is the right to use and occupy a land property or a premise permanently;
• Musataha is the right to build on the land, given for a certain period, not exceeding 50 years. The holder of the musataha right is considered to own all the buildings on the land plot for a fixed period of time;
• Usufruct is the right to use and occupy a land property or a building belonging to another person for a certain period not exceeding 99 years. Usufruct is similar to the concept of leasehold in English law.

In Dubai, the land property can also be given by a Dubai ruler to a UAE citizen for free for commercial, industrial or residential purposes. The given land property is not a freehold plot and is subject to various restrictions.

Both in Dubai and Abu Dhabi legal division of land and buildings into components is allowed. The UAE Civil Code does not explicitly prohibit foreign ownership of land property. However, each Emirate can make its own laws to regulate the ownership of real estate.

In Dubai, UAE citizens and citizens of GCC countries, as well as companies that are fully owned by them, can buy real estate property anywhere, within Dubai. Persons who are not citizens of the United Arab Emirates and GCC countries may hold freehold rights, leasehold up to 99 years or usufruct up to 99 years, only in certain areas of Dubai, which are listed in Regulation 3/2006 (as amended by Regulation 1/2010), or same in the UAE free zones.

What is a real estate investment company in the UAE?

Having a foreign company in the UAE allows not only to run a profitable business, but also to buy real estate property here. As a rule, for the acquisition and development of land is used a separate company with special objectives with limited liability. These structures are mainly used because they make it possible to distinguish between the responsibility of a particular company with special tasks.

In accordance with the existing Dubai Land Policy:

• A foreign company may own freehold, leasehold up to 99 years, or usufruct up to 99 years, only in designated areas of Dubai, and such a company must be registered either as a local legal entity in Dubai, or as an offshore company in the Jebel Ali free zone or in some other free zones;
• A foundation or trust, or a company owned by a foundation or trust, cannot own property anywhere in Dubai.

All companies operating in Dubai and Abu Dhabi who wish to sell real estate property inside or outside the UAE must first obtain permission from the Department of Municipal Affairs, in the case of Abu Dhabi, and through the Trakheesi system, in the case of Dubai (based on Real Estate Regulatory Agency Circular No. 11/2016 and Abu Dhabi Act 3/2015).

Although Dubai is a virtually tax-free emirate, there are government restrictions on:

• foreign investment;
• areas where investments are allowed;
• corporate structures that can be used for investment;
• licenses required for investment.

One company may own a piece of land and also be licensed to develop, and this license includes a lease. In addition, one legal entity may own a site while another company has a license. Different licenses are available, and each has its own advantages and disadvantages. The decisive criteria are:

• the intended use of the site;
• the nationality of the applicant.

Real estate investment trusts (REITs) are allowed, they can acquire real estate at the Dubai International Financial Center DIFC. However, REIT cannot work elsewhere in Dubai. Therefore, REITs are not commonly used.