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CONFUSED ABOUT THE REAL ESTATE LAWS IN DUBAI? SAME. LET'S GET SOME ANSWERS

Last modified on 1st February 2024. Dubai Real Estate Blog

By Ward Mohammad

11 minutes read

CONFUSED ABOUT THE REAL ESTATE LAWS IN DUBAI? SAME. LET'S GET SOME ANSWERS

Dubai, the distinguished Emirate of the United Arab Emirates, is known for its modern infrastructure, towering structures, and magnificent architecture. It provides luxurious accommodation for travelers, thus being a sought-after destination in the Middle East. With its excellent infrastructure, the city has become a hub for tourists, making its real estate highly sought-after in recent years. This has resulted in investors from around the world showing interest in Dubai property. To make the process of dealing with properties easier, the government of the Emirate has established a few Dubai Real Estate Laws in Dubai. These regulations cover numerous legal property matters that both realtors and investors must be aware of. This article will provide an overview of the Dubai Real Estate Laws to make the process of selling or buying property in Dubai smoother.

Introduction of Dubai Real Estate Laws

With the growing infrastructure and investment opportunities in Dubai, people from around the world are attracted to purchase real estate in the Emirate. To ensure a secure and safe property transaction, the government has implemented a set of Dubai Real Estate Laws. Both buyers and real estate agents must understand the legalities of these laws before making any property purchase.

Unlike in other countries, buyers in Dubai are not required to submit documents to verify the authenticity of the asset. All that is needed is a signature on the contract. Therefore, it is important to be aware of the Dubai property laws to guarantee a rightful investment. Knowing the Dubai Real Estate Laws in the UAE gives one the knowledge to understand their rights and the potential risks associated with owning or renting a property in Dubai or the rest of the UAE.

Most relevant to this tender, the DubaiLand Department (DLD) is a government-run entity in Dubai that oversees all real estate trading operations in the city and provides customers with a highly integrated, transparent, and secure experience. It provides information on the major regulatory arms of the DLD, such as the Real Estate Regulatory Agency (RERA) and the Real Estate Investment Management and Promotion Center, as well as key services offered, such as ownership certificate validation, rental dispute settlement, and statistical reports.

It also provides information on DLD's online portals and applications, such as the Smart Investment Map (SIM), Mollak System, eMart Dubai Real Estate Market, and REST. Additionally, it provides information on DLD's partners.

Overview of Dubai's Real Estate Market in Q2 2023

In Q2 2023, residential values across Dubai rose by 4.8%, with average prices 24% higher than in Q1 2020 and 17% higher on an annualized basis. Apartments increased by 4.8% to a little over AED 1,290 PSF, while villas increased by 4.8% to reach an average of AED 1,520 PSF. Prices in high-demand neighborhoods have exceeded the last market peak in 2014 by 5%, with Palm Jumeirah being the city's star-performing villa market, with prices growing by 9% in Q2 and 44% over the last year.

Dubai remains one of the most affordable luxury home markets, with average transacted prices of AED 3,560 PSF, and the prime residential market witnessed a remarkable 44% increase in property prices last year, which has further accelerated to 48.8%. Between now and the end of 2025, only 368 homes are expected in Dubai's prime neighborhoods. US$ 3.3 billion worth of homes were sold in the exclusive US$ 10 million+ price bracket in H1 2023, and Dubai emerged as the busiest US$ 10 million plus market in the world during Q1 2023, with 92 deals, surpassing Hong Kong and New York.

The current freehold residential market in Dubai is largely driven by genuine end-users and second-home buyers, with an average of 42% off-plan purchases over the last 10 years, and off-plan property sales have edged out sales for ready homes at AED 65.7 billion in the first half of 2023. The expected residential supply in Dubai between 2023 and 2028 is dominated by apartments with 59,000 units, while villas for sale are expected to total 27,000 units.

Cash purchases currently make up 80% of all transactions in Q2 2023, and with Dubai's population estimated to reach 6 million by 2033, this will drive the need for a large-scale residential development boom. Rental growth has been in lockstep with sales prices, meaning there has been no yield compression.

Who Can Buy a Property in Dubai?

Buying an asset in Dubai used to be a difficult process for foreign buyers and investors. According to the UAE property laws, expats were not allowed to own any property in the UAE real estate market. However, due to the increasing interest of expat investors in Dubai real estate, Sheikh Mohammad Bin Rashid Al Maktoum, the ruler of Dubai, declared new Dubai Real Estate Laws allowing expats to obtain freehold lease rights for up to 99 years.

As a result of this new law, expats can now own property in Dubai in freehold or leasehold areas designated by the city, similar to the rights of citizens of Dubai, who can own property all over Dubai. These freehold and leasehold rights are akin to property ownership rights in other countries. Expatriates who are the legal owners of a freehold or leasehold property can enjoy the benefits of the asset during the lease period or in perpetuity. In addition, expats can transfer their rights to their dependents or any other person.

Hence, the dependents can now own a property in Dubai. Furthermore, the beneficiaries are eligible to receive the asset upon the death of the freeholder. Therefore, to maintain ownership of a freehold property in certain areas of Dubai, the investor must receive approval from the current government of Dubai.

Dubai Real Estate Laws & Regulations in Dubai

Dubai, a widely known emirate of the UAE, relies heavily on tourism and real estate for its income. This has made it the home of the world's fastest-growing real estate market, where smart investors can make successful property purchases with a full understanding of Dubai property laws. These laws cover the sale, purchase, and ownership of Dubai properties. Here are some important points to consider when buying an apartment in Dubai:

  • A buyer must deposit 10-20% of the total property cost when making a purchase.
  • Note that for newly constructed projects, payments must be made in installments.
  • When making a property payment, 2% of the total price must be paid to the vendor or third party mentioned in the purchase contract.

Additionally, there are major Dubai property laws that every investor, buyer, and seller should be familiar with before entering the Dubai real estate market.

Dubai Real Estate Law Number Seven

Real Estate Law Number 7, passed by the Dubai government in 2006, sought to reduce restrictions on ex-pats concerning land and property ownership. Before this, ex-pats were not allowed to own property in Dubai. After the law was declared, non-residents and foreigners were given the right to rent or lease land and property, with a government-approved duration of up to 99 years.

Inheritance Property Law in Dubai

The Inheritance Property Law in Dubai can be complex compared to other Dubai property laws. If the landlord has a non-UAE nationality, then the law of that nation is taken into consideration. It can become even more complicated if the landlord holds dual UAE citizenship, but none of them is of UAE origin. In these cases, the law that adheres to the legal standards of the UAE or Dubai is applied. Additionally, it is essential to lawfully assign the property to the rightful beneficiaries.

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In the absence of a legal will, the court will decide whether the state will take ownership of the property or whether it will be divided among the recipients. Therefore, all non-residents or foreign investors in Dubai must have a legal will to secure their property for their dependents.

For Real Estate Developers

Real estate developers in Dubai must be registered with the Dubai Real Estate Regulatory Agency (RERA) to legally participate in the industry. As part of the registration process, proof of the developer's financial and time commitment to the project must be provided, as well as a business plan.

Once registered, developers must adhere to all RERA regulations. Before starting a real estate project, they must obtain a license from RERA and must disclose detailed information about the project, such as its location, size, and type of units. This includes following advertising guidelines, providing all necessary information, and resolving any disputes. Also, an escrow account must be set up for each project, into which buyers must deposit their payment as a safeguard to ensure that the funds are used exclusively for the project's completion.

Failure to comply with RERA rules and regulations can result in fines or suspension of the project.

For Real Estate Brokers

Bylaw No. (85) of 2006, Regulating the Real Estate Brokers Register in the Emirate of Dubai, is an essential law that sets the rules for all brokers in the emirates. To be able to act as a real estate broker in Dubai, any person must first receive certified training from Dubai Real Estate Institute and pass the exam conducted by RERA, granting them a real estate license. The Bylaw No. 85 also outlines the regulations that all licensed brokers must follow.

The law encompasses any legal person who is involved in the intermediation of real estate transactions, including activities such as searching for a property that meets the client’s requirements, negotiating between buyers and sellers, preparing and verifying sales contracts, and providing expert advice on real estate matters.

  • Strata Law

Strata Law regulates the separation of properties into privately held units and jointly owned common areas, which are overseen by an owners' association. This legal framework applies to multi-unit dwellings such as flats and townhouses.

It establishes the guidelines for the management and upkeep of shared amenities and facilities in these multi-unit constructions.

  • Three broker rules

The three broker rules implemented by DLD prevent sellers from listing their property with more than three brokers simultaneously. This is done to reduce the number of duplicate listings (where multiple agents advertise the same property), allowing professional brokers and agencies to deliver their services more effectively and provide a better experience for clients interested in properties. The process is highly beneficial for both buyers and sellers.

  • Rental Property Laws in Dubai

Apart from the buying and selling of real estate, Dubai also offers attractive rental yields. As a result, the government has created specific rental property laws in the UAE to protect both landlords and tenants.

  • Those looking to rent a property in Dubai must enter into a one-year tenancy agreement to secure the rental.
  • The landlord is not allowed to increase the rent during the contract period, and any increases must be made once the contract has expired or is up for renewal.
  • Furthermore, the rental property law in Dubai stipulates that landlords are not permitted to raise the rent by more than 15% at a time.
  • If an issue arises between the two parties, they are required to go to the municipal rental control committee to settle the dispute.
  • Both the owner and tenant are expected to abide by the ruling of the panel.
  • Dubai Real Estate Laws about ownership in Dubai for foreign nationals and ex-pats

Dubai boasts some of the most liberal foreign ownership laws in the world, making it an ideal place for international investors. There are no limitations on purchasing real estate in certain areas of the emirate, creating an easy pathway for foreigners to buy and sell the property. This policy is in place to attract more investment into the property industry, further enhancing the city's reputation as a desirable destination for real estate investment.

Getting a property in Dubai is relatively simple, with a vast selection of properties to choose from luxury villas for sale with views of Palm Jumeirah to more conservative 3-bedroom apartments in the city or flats overlooking Burj Khalifa. The one thing to take into consideration is that foreign investors must obtain approval from the DLD before they can purchase the property.

Conclusion

Residents and non-residents alike need to be informed of the Dubai Real Estate Laws in Dubai if they are considering investing, selling, buying, or renting an apartment in the city. Knowing the laws will enable investors to learn who is eligible to invest in Dubai property, the circumstances that can enable the transfer of ownership, the ramifications of dual citizenship, and the duration an expat can lease the freehold for. Understanding the Dubai property laws will allow investors to make an informed decision and maximize the potential of their investment.

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