Leasehold vs Freehold Property in Dubai

Leasehold vs Freehold Property in Dubai: Which One Should You Buy?

In Dubai, there are two basic types of home ownership—freehold and leasehold. If you are a foreigner and looking to purchase a property in the city, make sure you consider the types of ownerships, unlike some buyers who overlook them.

It is a good idea and crucial to understanding the property ownership types for foreigners before you shell out money in buying a property in the city.

Knowledge about the difference between freehold and leasehold property types will help you make a better decision about purchasing a property in Dubai.

So, why not learn about the property ownership rules and the pros and cons of the two ownership categories before investing in a property in Dubai?

Leasehold and Freehold Property

In the UAE, Dubai was the first emirate to open its designated areas or zones, allowing foreigners and expatriates to own property. The Dubai government passed a law in 2001 that granted foreigners the right to own property on a leasehold basis. In the following year, 2002, the government passed the law, giving foreigners the right to purchase and own property on a freehold basis.

The difference between the two property ownerships lies in the rights buyers get. So, let us dig the contrast a bit deeper.

Leasehold Ownership

If you buy a property on a leasehold basis, you will get the right to own the property for a fixed term, usually 99 years. With this type of ownership, you will get the right to own the property and not the land on which the property stands. The ownership of the land remains with the freeholder. What takes place is that a freeholder leases the land to construct the property for the specified term, and once the term comes to an end, the entire ownership reverts to the freeholder.

Freehold Ownership

Purchasing a property on a freehold basis will enable you to get the ownership of the property and the land on which it is built, without any time restrictions. It means that you are the king. You can sell, rent out or occupy the property at your will. It will not be wrong for you to regard purchasing a freehold property amounting to owning land in Dubai. According to the city’s property ownership laws, the Dubai Land Department will register the buyer of a freehold property as the landowner in the registry and grant a title deed for the property.

Now, you have come to know about the fundamental difference between the types of property ownership in Dubai. So, why not examine the pros and cons of leasehold (99-year lease) vis-a-vis freehold property rights?

Pros

Both the property types entail a slew of benefits, like:

Leasehold Property

With ownership of a leasehold property, you can continue living in the property as a leaseholder by renewing the lease at the end of every term. There will be a limited liability for you regarding repairs and maintenance, which are mostly the responsibilities of the freehold owner.

Freehold Property

There can be many benefits of buying freehold property in Dubai. It will provide you with the owner and complete control of the property and the corresponding land. So, you can repair or renovate the property whenever it seems fit. What is more, you can pass the property to an heir after your death.

Apart from selling, renting, or occupying the property at your will, you and your family will also be eligible for renewable UAE residence visas, subject to fulfillment of certain conditions.

There is another advantage for you when looking for freehold Dubai properties. You will find ample properties to choose from in the freehold areas in Dubai. The properties correspond to different budgets, tastes, and requirements.

And the last thing is that you can get high return-on-investment with freehold apartments in Dubai that elicit returns up to 9 percent.

Cons

Along with the pros, the property types come with cons, such as:

Leasehold Property

One of the cons of leasehold property ownership in Dubai is that you will need to get written approval from the freehold owner to repair or renovate it. Likewise, there will be restrictions on subleasing the property or owning pets.

Freehold Property

Owning a freehold property in Dubai means you will be responsible for the property’s maintenance and upkeep. If you rent out the property to a tenant, you will be responsible for any significant repairs or maintenance.

Which Property Should You Buy: Leasehold or Freehold?

Suppose you are stuck in the confusion of which type of property to buy: leasehold or freehold. In that case, it is a good idea first to understand the corresponding legal rights and responsibilities.

As we have already said, the striking difference between property ownership types is the element of control. Compared with leasehold property owners, freehold property owners have more control over their property and the land. They can repair and renovate the property as they wish.

When it comes to leasehold property ownership, leasehold owners also have some control, and 99 years is long.

So, while deciding which property type to go for, consider how long you plan to stay in Dubai. If you plan to stay in the city only for some years, then go for a leasehold property. And choose a freehold property if you plan to stay for a long term or permanently with your family.

Besides, there are other factors to consider, such as your specific needs, property use, and budget. You also need to consider the property and the neighborhood while deciding which property types to go for eventually.

However, both the options have their perks, so do due diligence and make sure you zero on the right property.

Conclusion

Your decision to buy a property in Dubai involves a hefty financial commitment. So, do not forget to check out your financial status to figure out your affordability. If you plan to rent out the property you want to buy, then go through the Dubai Tenancy Law to acquaint yourself with the rights of tenants and your responsibilities. Also, go through the property ownership rules in the UAE for foreigners.