The real estate market in Dubai has experienced an impressive surge, seeing a remarkable 225% increase since 2020 with a worldwide influx of investors seeking what the landscape has to offer. To avoid a replication of 2008’s downturn, the Dubai government has taken the liberty of implementing various laws and regulations not only to regulate this sector but also to protect the buyer. As good as the agenda of these regulatory shifts in this sector is, it can also significantly impact investment strategies.
Changes in laws regarding property ownership rights, visa regulations, or taxation policies have been known to greatly influence the market. Without strategy, an oversupply, and overdevelopment, the occasional changes in the regulatory framework can affect property values, rental yields, and the market’s overall stability. The Dubai Land Department (DLD) currently overseeing all real estate activities within the emirate, has the primary role of maintaining a comprehensive land registry, a regulatory system for property transactions, and a monitoring department that ensures the enforcement of real estate laws. We’re here to give you a quick breakdown of what these changes look like and what they mean for you as the end buyer.
Most Recent Changes and Impacts
Dubai's real estate market is dynamic, fluid, and agile, and can be influenced by local developments and global trends. The industry witnessed transactions worth a record AED634 billion sold in residential value during 2023, indicating a 20% increase in just the previous year. The real estate sector is projected to continue its exponential growth trajectory, with new emerging investment areas offering exciting opportunities for investors and first-time home buyers alike. One of the most noticeable trends in recent years is the shift toward affordable housing, where homeownership is more sought after in the light of rising rent prices.
The increased demand for residential properties in Dubai is only a testament to its enduring allure. The average sales prices for residential property in Dubai increased by approximately 10% between Q3 2021 and Q3 2022. The selling price of MBR City increased by a wholesome 10.5% and Palm Jumeirah by a steep 18.5%. These stats are edified by 37% of ultra-high-net-worth individuals (UHNWIs) in the Middle East who grew their wealth in 2022 by more than 10%, surpassing the global average of 17%.
We’ve observed that the real estate market in Dubai does not operate in isolation; however, various global trends and economic factors influence it, often directly. Economic diversification and the global footprint of Expo 2020 for example, has significantly impacted the real estate sector within the city, where its success birthed new developing areas like Expo City.
The strategic move towards becoming a tourism, business, and logistics hub has made Dubai's real estate market not only more stable but stronger and more attractive to long-term investors. Government initiatives, such as reduced transaction fees, long-term residency visas, and new business initiatives, have continued to successfully stimulate foreign interest. Looking a little closer at Dubai’s future and the initiatives at play, we see the following insights:
Dubai 2040 Urban Master Plan
Is a comprehensive plan forged for a new sustainable urban development in Dubai, focused on enhancing people’s happiness and quality of life and reinforcing Dubai as a global destination for the next 20 years. The initiative has a strategic and structural layout that integrates all urban development master plans in the emirate to align with strategic economic priorities that encompass the anticipated needs of the future. This will be the seventh development plan for the emirate since 1960. The population of Dubai has multiplied 80 times from 20,000 in 1960 to 3.05 million while the urban and built area of the emirate increased 170-fold from 3.2 square km. The key objectives of Dubai 2040 Urban Master Plan are to upgrade Dubai’s urban areas, improve the efficiency of resource utilization, develop vibrant, healthy, and inclusive communities, and double green and leisure areas to provide a healthy environment for residents and visitors with sustainable and flexible means of mobility. The 2040 Urban Master Plan is expected to have a significant and positive impact on the real estate market, attracting foreign investment, and contributing to the region’s economic growth.
New Laws to Regulate the Real Estate Sectors
The UAE has recently introduced several new laws and amendments to regulate the real estate sector. These laws encompass various aspects of real estate activities, including property ownership, brokerage, and investor protection. The Dubai Land Department (DLD) is the government entity that is responsible for regulating and governing the real estate market in Dubai. The DLD is responsible for the registration and recording of all real estate transactions that take place within the emirate. Alternatively, the Real Estate Regulatory Authority (RERA) is a division of the DLD that is responsible specifically for setting the laws and regulations of the real estate sector (as per, Law No. 4 of 2019). Their agenda and ambition, to name a few, include the following:
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Resolving any tenancy disputes.
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Regulating foreign investment in Dubai.
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Licensing of real estate brokers and developers
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Monitoring banks, insurance, and law companies within the real estate industry.
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Accrediting and regulating financial institutions that are qualified to manage real estate development escrow accounts.
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Approving regulations that govern the development, brokerage, and management of real estate including joint property.
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Monitor real estate advertisements published through media outlets and social platforms whilst launching awareness programs to educate the public about their responsibilities and rights as tenants in Dubai.
Working in collaboration the departments of DLD form an extensive body of governance, that monitors, maintains, and develops legislative strategy, with a focus on creating a strong foundation for the Real Estate sector in Dubai going forward.
Regulatory Framework Changes
The regulatory framework changes in the UAE's real estate market encompass several significant developments. Some of the key shifts include:
Foreign Ownership Laws
The foreign ownership laws in the UAE, particularly in the real estate sector, have undergone significant changes. Historically, foreign investors were generally not allowed to own land in the UAE, and outright ownership of land was reserved primarily for UAE nationals. However, recent developments have relaxed these restrictions. Foreigners can now fully own freehold properties in specific zones, known as "freehold areas," further opening up the market to international investment. These changes reflect the UAE's efforts to attract foreign investment and create a more open and transparent business environment.
Freehold Ownership
One of the key attractions for foreign investors in the real estate market in Dubai is the availability of freehold ownership. Foreigners are allowed to own property and land in designated areas of the city. However, Article 4 of Dubai Property Law limits the right of foreign individuals and foreign companies to freely own, or lease property for a certain period in specifically designated areas.
Limitations of Freehold Ownership
The limitations of freehold ownership in the UAE vary depending on the type of property and its location. However, some general limitations and considerations include:
Designated Areas:
Freehold ownership is typically limited to specific zones, known as "freehold areas," such as Palm Jumeirah, Downtown Dubai, Dubai Marina, and Emirates Hills. Ownership rules may vary depending on the type of property and its location.
Leasehold Properties:
Unlike leasehold properties, which are owned by the government or a landlord, freehold properties give the owner complete control over the investment. However, there may still be restrictions on making changes or modifications to the exterior of the property, for which the developer's approval may be required.
Inheritance and Residency:
Freehold properties are automatically transferred to the heirs of the owner with or without a will. Foreigners residing outside the UAE are also eligible to buy freehold properties. The heirs can continue living in or leasing the property even after the owner dies.
Service Charges and Fees:
Freehold properties generally do not require paying any service charges or annual fees to the government or a landlord, making them an attractive investment with high potential for capital appreciation.
These limitations and considerations are important for individuals looking to invest in freehold properties in the UAE, as they provide a clearer understanding of the rights and restrictions associated with such ownership.
Rental Laws
In the UAE, particularly in Dubai, rental laws are in place to protect the rights of both the landlord and the tenant. The Real Estate Regulatory Agency (RERA) plays a vital role in regulating tenant's rights, outlining landlord's obligations, and determining the overall relationship between landlords and tenants. The rental law in Dubai specifies rights and obligations for both parties, covering aspects such as security deposits, termination of contracts, and maintenance obligations.
Regarding rent increases, Decree No. 43 of 2013 governs this aspect in Dubai. The law explicitly regulates rent increases, and landlords can increase the rent once the rental contract has expired. However, rent increases are capped to prevent exploitation. The specific percentage by which the rent can be increased is determined by the Dubai Land Department based on the average rent in the area. This ensures that rent increases are in line with market rates and prevents arbitrary or excessive hikes.
Standard lease agreements are also available to provide clarity and transparency in the rental process. These regulations contribute to a fair and transparent rental market, ensuring harmony and stability for both parties and promoting Dubai's status as a preferred global destination.
In Summary
For real estate ventures in Dubai with strategically backed decisions that include comprehensive services to help you secure your future and grow your wealth, Cielo Properties is your key component. With over two decades of collective expertise in Dubai’s vibrant landscape, we go beyond expected brokerage offerings, we cater to you with every insight, prospect, and data point. From meticulous property registration, real estate development oversight, and transaction supervision to reliable mortgage registration and investor rights protection, we ensure every aspect of your real estate journey is seamless, secure, and successful. We empower you to make the right decision in a multitude of choices. In our next article, we delve a little deeper into all the new laws, and regulations, and what that means for you.