Foundation of the Future: Investing in UAE Real Estate
In the recent past, it has been realized by the economies around the world that the best for development is by opening the economy and allowing free trade.
Similar is the case of the United Arab Emirates, who’s government, in the past few years, realized the importance of free trade and foreign direct investment, and providing rights to those foreigners who invest money in UAE through the channel of F.D.I. In the last few years, the government of UAE has introduced many legislations, which are helpful in the development of the investment regime and foreign trade in the UAE.
Difficulties Prior To Regulation
But after all this, a significant decline has been seen in the prices of real estate and properties of the UAE. Although, many real estate tycoons believe that increase and decrease of prices in real estate is quite natural and occurs regularly. Still, recent downfall occurred in U.A.E. due to regulation governing the real estate properties.
One of most significant problems of the regulations is that it does not allow the foreign entities to earn ownership in some of the properties of the UAE and the could only be leased to these entities for a period of 99 years. Due to these regulations, many entities were reluctant and unsure regarding investing in the UAE market.
The New Regulations
Therefore, with the continued decline in real estate prices, the introduction of FDI (Foreign Direct Investment) Laws not to mention the recent relaxations of FDI and the past year conclusion of two MoU (Memorandum of Understanding) between Dubai Land Department (DLD) and both Dubai International Finance Centre (DIFC) and Abu Dhabi Global Market (ADGM), it makes investment in real estate affordable for the foreign investors. It appears quite easy as well as affordable to own real estate in the emirate of Dubai than in the whole of UAE.
These MoUs between DIFC and ADGM have brought forth a welcoming relief. It enables DIFC registered companies and other legal entities, ADGM registered companies and establishment to own real estate within the emirate.
The new regulations intend to tap into the expat population’s investment potential by making them easier to own real estate within Dubai. The regulations improve Dubai as a global centre-point for people, organizations and entrepreneurs hoping to take full advantage of a city committed to providing ease of living, innovation and business success.
Initiatives such as long-term visas or “Golden Card” residency permits, relaxed regulations in foreign ownership of businesses, and the Central Bank’s removal of 20 per cent cap on real estate lending as a percentage of total deposits, are taken to boost the investments in the real estate sector.
These initiatives being pro-investor are quite appreciable. It generates great hope among many real estate developers that the prices will rise. However, it is expected that the recession in prices will continue till 2022, it is believed by many that these steps will help in lessening the impact of the recession on the real estate market of the U.A.E.
Foundations for Future
The 2018 G.C.C. Wealth Insight Report[SD1] indicates that most of the individuals prefer keeping their assets closer to home, allowing for the consolidation of substance in one jurisdiction where there are limited tax liability consequences. Thus, to ease their interest and boost the sector earlier probate problems has been eroded.
Individuals can now hold onshore assets through a combination of DIFC/ADGM Foundations and their respective Prescribed Companies and SPVs. Along with a solution to succession planning for Muslims, these foundations are permitted to own real estate properties in the U.A.E., with the DIFC Foundation working for Dubai real estate and the ADGM Foundation working for Abu Dhabi real estate.
Therefore, all these regulations and change in law and signing of new MOU will be beneficial for the real estate market of the UAE; it would bring new hope for industries and investment groups that now their investment is protected. Hence, they can invest and create and keep all their assets in the UAE, where tax liability is also less compared to the other markets of the world.
As the prices have fallen, it may be well-argued that it is the best time for the purchase of these properties and many investors around the world do like to invest in properties in Dubai. Hence, investors want to take help of change in the regulation of the UAE and buy properties. These changes further ensure that there is an increase in the demand for properties which will help in cutting recession in the market. Hence, these investors will look towards DIFC and ADGM foundations to structure local real estate assets.
It is further pointed out in the regulations that the choice of selecting the foundation is of investor only. Since, both DIFC and ADGM provide a sophisticated method of structures such as SPVs, Trusts and Foundations for secured succession planning and real estate ownership. Therefore, any Foundation which the investor feel is sophisticated for his need shall deal with the assets of the investor.
Therefore, these changes made by the government of the UAE shall be appreciated, and it is further hoped and believed that these changes will ensure growth in the economy and real estate market of the UAE.
Adv. Shayan Dasgupta
Corporate & Commercial Law | M&A | FinTech, Blockchain & AI