Following the announcement of recent legislation, Abu Dhabi is the next Emirate to follow in the footsteps of Dubai by allowing non-UAE/GCC nationals to be able to acquire freehold property rights in certain defined areas.
Up until 2002, there was no provision in Dubai or Abu Dhabi that would allow expats to own a form of property, meaning expats living in the region had to invest elsewhere and rent property in the respective Emirates. Over the last 17 years, we have seen steady changes that have allowed non-UAE/GCC nationals to invest in Dubai across various different designated ‘freehold’ areas; however, the same changes did not reach Abu Dhabi… until now.
The new Abu Dhabi law, issued on 16 April 2019, to amend Law No.19 of 2005 (the “Property Law”), extends the categories of investors that can own and deal in real estate to include non-UAE/GCC nationals who are natural or legal persons, within the defined investment zones. The designated investment zones include, amongst others, Yas Island, Saadiyat Island, Al Reem Island, Al Maryah Island, LuLu, Al Raha Beach, Sayh Al Sedairah, Al Reef and Masdar City.
Before this amendment was announced, ownership in Abu Dhabi was largely restricted to UAE and GCC nationals. Only UAE nationals were permitted to own freehold property across Abu Dhabi, with GCC nationals allowed to purchase the freehold in certain investment zones. Foreign investors were restricted to only purchasing in Abu Dhabi’s investment zones through 99-year leases, musatahas (50-year renewable lease), usufruct (for 99 years) or through a long-term lease (for 25 years or more), and were not permitted to purchase the freehold.
The amendment to the Property Law has confirmed that non-UAE/GCC nationals in Abu Dhabi may now own property interests including freehold, musataha and usufruct interests within certain designated investment zones. Under the Property Law, a freehold owner will have full capacity to deal with the real estate, including obtaining a mortgage and disposing of the interest. Where an international investor owns the right of usufruct or mustaha, and the interest is for a term exceeding 10 years, the owner is also permitted under the Property Law to freely dispose of their interest in the real estate, or to mortgage the property, without the beneficial owner’s permission.
We are not certain how the new Property Law will affect existing non UAE/GCC real estate leaseholders in Abu Dhabi, who were only able to purchase a leasehold interest in real estate. For example will a 99-year lease be capable of being converted in to a freehold interest if sold? We will watch out for further developments around this.
We are, however, certain that these recent developments will help to level the playing field between Abu Dhabi and Dubai, and act as a key corner stone in helping to drive foreign investment in the Abu Dhabi real estate market. The changes provide increased transparency in the market and should assist to instil a sense of permanency for investors in the region, which, in turn, should have a positive effect on the wider economic and cultural landscape in the Emirate.
Article authored by CMS trainee Lyndsey Shaw.