Freehold vs. Leasehold Properties in Dubai – What you must know before investing

Freehold vs. Leasehold Properties in Dubai – What you must know before investing?

Dubai real estate is an attractive market that equally entices expatriates and international investors with its exciting real estate investment opportunities. Before you pick any project and make up your mind to invest in; let us tell you that there are 2 types of legal property ownerships available for the expatriates and foreign investors – Freehold and Leasehold.

It is crucial to understand the difference between both property ownership types, before shelling out money in Dubai real estate sector.

Leasehold vs. Freehold properties in Dubai

Out of all seven emirates in the United Arab Emirates, Dubai was the first one to allow expatriates and foreigners to invest in the real estate sector on a freehold basis, in 2002. In 2001, the Dubai government allowed foreigners to own property in Dubai on a leasehold basis. The major difference between both ownership choices is buyers’ rights. For instance;

Leasehold property ownership: Buying a leasehold property means the buyer will get property rights for a fixed term, which cannot exceed 99 years. The buyer does not own the property’s land.

Freehold property ownership: The buyer who invested in freehold property can enjoy absolute ownership of the property and the land it’s built on.

What are the pros and cons of Freehold and Leasehold property in Dubai?

Leasehold property ownership

In leasehold property ownership, the buyer does not own the land. Therefore, if he plans for structural remodelling or any layout amendments – he will have to seek permission from the freeholder. Let’s have a look at a few pros and cons of leasehold property:

Pros of investing in leasehold properties

  • With leasehold property ownership, the buyer can renew the contract by the end of the term and continue living in the same place.
  • Investing in leasehold properties offers buyers more options in terms of price and area selection.
  • Leasehold properties are somewhat cheaper than freehold properties.
  • The buyer has limited liability for a leasehold property, when it comes to repair or maintenance of the property.

Cons of investing in leasehold properties

  • There will be a restriction on subleasing the property.
  • To make any change in the leasehold property, the buyer will need written approval from the freehold owner.

Freehold property ownership

When a buyer invests in freehold property, Dubai Land Department (DLD) registers the buyer’s name as ‘landowner’ in the sales document and grants him the title deed for the property. The property owner is free to lease and sell the property, at his discretion.

Pros of investing in freehold property

  • As it is just mentioned above that the freehold property allows the owner to have full control of the property unit. He can renovate or remodel the property as per his choice, while abiding by the guidelines set by the developer.
  • If the value of the property exceeds the value of AED1 million, the freehold property owner becomes entitled to the UAE residence visa. With the introduction of new Golden visas, the owner of freehold property can be eligible for a 5 and 10 year residence visas.
  • The property can be sold or leased as per the owner’s discretion.
  • The property will be transferred according to the inheritance law, in case of the owner’s demise.
  • Foreigners and expatriates both can invest in freehold properties.

Cons of investing in freehold property

  • Buyers can buy freehold properties in the designated areas in Dubai.
  • Property owners will be solely responsible for the upkeep, maintenance and repairs of the property.

Freehold and leasehold property – which one is the best investment choice?

When it comes to choosing between freehold vs. leasehold property in Dubai, it becomes a difficult choice but it is crucial to understand the major differences between both types of ownership.

The major and striking difference between both types of properties is the element of control. Compared to leasehold properties, freehold property owners have more control over their property and land. While following the developer’s instructions, the freehold property owners can repair, renovate or retouch their properties.

If we let go of the matter of control over the property, the leasehold owner can enjoy the property at relatively lower rates for as long as 99 years. Interestingly, once the term is over, the owner can extend it again and continue living in the same property.

Other major concerns that should be addressed before buying a property in Dubai are your budget, property usage, size of family, condition of the property and the neighbourhood. Depending upon your plans to live in Dubai, you can pick one from both options. A leasehold property is a good choice, if you will live here only for a few years, while the other type suits you the most if you plan to stay in this emirate for long.

Conclusion

Every option has its own perks, when it comes to investing in Dubai properties but it eventually comes down to your own choice and financial commitment. If you are looking for freehold or leasehold property options in Dubai, you must contact the team HFRE at +971 4876 2473 or write us at info@hfre.ae and we will get back to you with hand-picked options, according to your budget and needs.

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