UAE continues to be one of the most attractive jurisdictions for foreign direct investment. Real estate is a crucial sector towards garnering more investment into UAE. In fact, high value investment in UAE real estate, subject to fulfilling the specified conditions, may also help a non-resident buyer in obtaining a long-term UAE visa.

The Federal Law No 5 of 1985 (Civil Code) is the overarching law which provides for the types of property and deals with the rights deriving from ownership of land. That said, each Emirate has issued its own laws on the acquisition and transfer of land and these should be referred to for specific advice.

Types of Real Estate

Following are the types of real estate recognized in the UAE.

1. Freehold

It is the unlimited ownership right of the property on a permanent basis. Specified areas in the UAE are considered as freehold land.

2. Usufruct

This is a right to use and exploit the property owned by another person for a limited period of time. This right is subject to the property not undergoing any change.

3. Musataha

This is a right to undertake construction on land for a period not exceeding 50 years. The new construction made is owned by the holder of the Musataha right and he has the right to dispose the new construction along with the right of Musataha.

Who can Buy Property in the UAE?

UAE citizens, judicial persons, expats and even non- UAE residents can buy property in the UAE, subject to meeting specified conditions.

Transfer of Property

According to the Civil Code, a property may not be transferred between parties unless it is registered in accordance with law. The Dubai Law 7 of 2006, which deals with property registration in the Emirate of Dubai clarifies that all actions related to establishment, transfer, change or removal of a property right will not have any effect unless it is registered in the property register. The title deeds that are issued by the authorities is treated as absolute evidence in proving property rights under the Dubai real estate law.

For property to be transferred and registered in the UAE, broadly the following steps have to be completed.

Due Diligence:

A due diligence on the property is conducted to confirm that that seller has the complete right to sell the concerned property. Typically, property due diligence includes reviewing the title documents, physically inspecting the property and examining the property register, if possible.

Term Sheet & Contract of Sale:

Buyer and seller usually enter into a term sheet or a memorandum of understanding setting out the fundamental terms of the deal, as agreed between the parties. The term sheet is usually valid for a limited period, until the signing of the sale contract and is usually subject to completion of a satisfactory due diligence.

The sale contract should have details of the property, the buyer and the seller, purchase price, terms of payment, governing law, dispute resolution and a termination clause. If the authorities have specified a standard sales contract, then that template should be used with an annexure setting out the additional terms.

The Civil Code sets out some general provisions that should be mentioned in a sale contract. For instance, Article 491 states that the contract should state that the buyer had knowledge of the sale and cannot annul the contract for lack of knowledge, unless it is proved that the seller had deceived the buyer.

The procedure of transfer and registration of the property may differ for each Emirate. Generally, the procedure involves submission of the documents with the authorities, payment of the purchase price and receipt of payment, verification of the transaction and issuance of the title deed to the buyer.