With the real estate market in Dubai booming, it has become a prime destination for investors around the globe. Moreover, with a plethora of properties available for purchase or rent, people now enjoy a wide array of options.
Nonetheless, property acquisition in the Emirate is far from straightforward; there’s a myriad of factors to consider, and a significant one is the decision between freehold, leasehold, and non-freehold property.
To assist you in making the right choice for your needs, let’s delve into the details of freehold vs. leasehold vs. non-freehold property.
What Is a Freehold Property?
When you own a freehold property in Dubai, you have complete ownership not only of the home but also of the land it stands on.
Also, the Dubai Land Department records the buyer’s name as the ‘landowner’ in the official registry and issues a title deed for the property.
Additionally, expatriates have the opportunity to purchase freehold properties in certain designated freehold areas in Dubai, including Downtown Dubai, Dubai Hills Estate, Dubai Marina, etc.
Benefits of Buying a Freehold Property in Dubai
Here’s what a freehold property has to offer to the owners.
- Purchasing a freehold property in Dubai grants the owner full authority over both the unit and the land it occupies. Moreover, those with freehold property in Dubai have the freedom to remodel or renovate the structure according to their preferences, as long as it complies with the guidelines of the developer.
- When the value of the freehold property surpasses AED 1 million, the property owner and their family members are eligible to secure a UAE residence visa that can renewed.
- Also, the owner enjoys complete control and autonomy. They can sell or lease it without any hurdles.
- Freehold property owners can also take advantage of the potential for a high return on investment. For example, some freehold areas offer as high a 9% ROI.
Cons of Buying a Freehold Property in Dubai
- In Dubai, freehold property owners are responsible for maintaining and taking care of their properties. For example, if the owner has rented the property to a tenant, they will be accountable for any repairs or maintenance required.
- The initial expense of acquiring a freehold property in Dubai is generally higher when compared to leasehold and non-freehold properties. This is mainly due to the fact that freehold properties include the cost of the land, which is typically more expensive than the cost of constructing the property itself.
What Is a Leasehold Property?
Leasehold property involves the practice of leasing a unit from its legal owner for a duration of 99 years or less. As it’s leased ownership, it grants the buyer rights to the unit but not the land it stands on.
Moreover, in Dubai, leasehold properties are typically accessible to individuals who are not citizens of the UAE and are commonly used for commercial or industrial purposes.
Benefits of Buying a Leasehold Property in Dubai
- The leaseholder has the option to renew the contract at the end of the term and continue residing in the house.
- When you own a leasehold property in Dubai, the leaseholder typically has limited liability for property repairs.
- Additionally, the average sales price for leasehold properties tends to be lower than that of freehold properties.
- Property lessors provide flexible payment options for leasehold properties, enabling buyers to distribute their payments over multiple years.
Cons of Buying a Leasehold Property in Dubai
- There is a limitation on subleasing the property.
- If any modifications are desired for the leasehold property, the buyer must obtain written approval from the freehold property owner.
What Is a Non-Freehold Property?
In Dubai, the term “non-freehold areas” refers to neighborhoods that do not allow foreign investments, restricting property ownership exclusively to UAE and GCC nationals.
Also, to determine whether your chosen area or project falls within the freehold or non-freehold category, it’s advisable to seek guidance from a local real estate agent or confirm with the Dubai Land Department.
Perks of Buying a Non-Freehold Property in Dubai
- Non-freehold properties are more affordable than freehold properties because you are only buying the right to use the property for a specified period rather than acquiring full ownership.
- Non-freehold properties may be more accessible to individuals or investors with a limited budget, making it easier for them to enter the Dubai real estate market.
- Non-freehold properties can provide investment opportunities, especially if you intend to lease the property to tenants, as it allows you to earn rental income over an extended period.
- Additionally, non-freehold properties may be located in prime areas and regions of Dubai, allowing you to access desirable locations that might be unaffordable with freehold properties.
Cons of Buying a Non-Freehold Property in Dubai
- The flip side? When the lease term of a non-freehold property expires, there can be uncertainty regarding whether the lease will be renewed, the terms of renewal, or if the property will revert to the landowner or government. This lack of long-term ownership security can be a significant drawback.
- Securing financing for non-freehold properties can be more challenging compared to freehold properties, as banks and financial institutions may be hesitant to provide loans due to the lack of full ownership rights.
- Non-freehold property owners usually have limited control over the property in terms of making major alterations or renovations. You may need permission from the landowner or the government for any substantial changes.
Factors to Consider When Buying Freehold Vs. Leasehold Vs. Non-Freehold Properties in Dubai
When choosing between freehold, non-freehold, and leasehold properties in Dubai, there are several key factors to keep in mind.
Investment Goals
Freehold properties are an excellent option if you are seeking a long-term investment. On the other hand, leasehold properties can be a better fit if you are planning for short-to-medium-term investments.
Budget
Leasehold and non-freehold properties typically come with a lower upfront cost, which can make them a more accessible option for investors with limited budgets.
Location
It’s essential to think about the property’s location and how it aligns with your investment objectives. Leasehold properties and non-freehold properties are usually situated in prime and well-established areas, while freehold properties may be found in newer developments.
Future Plans
If you are considering selling or leasing the property in the future, freehold ownership may be a more advantageous choice due to fewer restrictions.
Thus, carefully weighing these factors will help you make an informed decision that aligns with your investment goals and financial situation.
| Freehold Property | Leasehold Property | Non-Freehold Property |
| Owners have complete control over the property. | Leasehold owners only have the right to a home or apartment via a lease. | Non-freehold property owners have only the right to the unit but no ownership of land. |
| They are generally more expensive as you are paying for the land as well as the property. | Leasehold properties are less expensive. | These types of properties are budget-friendly. |
| You have the freedom to both rent or sell the property. | Subletting isn’t allowed. | Reselling a non-freehold property can be challenging, as potential buyers may be deterred by the limited ownership rights and the uncertain future of the property when the lease expires. |
| Foreigners can buy freehold properties. | Only Emiratis and GCC nationals can buy leasehold properties. | UAE and GCC nationals can purchase properties in non-freehold areas. |
| Freehold property owners have full freedom over the property in terms of renovation. | To make any alterations to the place, the tenant must have permission from the owner in written form. | Non-freehold property owners need permission from the government or landowner for any substantial changes. |
| Owners retain complete ownership of both land as well as the property. | After the expiration of the lease, it is uncertain whether the lease will be renewed or not. | When the lease of a non-freehold property expires, there can be uncertainty regarding the renewal of the lease. |
| Owners don’t have to pay any type of rent since they own both the house and land. | Leasehold property owners have to pay rent to the owner. | Individuals living in non-freehold properties generally have to pay rent as the properties are often leasehold or rental. |
| Banks are more comfortable providing loans for freehold properties since the owners retain ownership of the land. | Securing mortgage loans can be challenging since the owner doesn’t own the land. | It is difficult to secure a loan on non-freehold properties because of the lack of full ownership rights. |
| Individuals can buy freehold properties in designated places, limiting choices. | You can purchase any property on lease, provided it is available for sale. | Specific areas and properties are categorized as non-freehold that individuals can rent or lease such properties. |
Final Words
In a nutshell, when you are trying to choose between freehold, non-freehold, and leasehold properties, it’s crucial to have a good understanding of the legal rights and responsibilities that come with each type of ownership.
One of the most significant differences between freehold, leasehold, and non-freehold ownership lies in the level of control you have.
If you own a freehold property, you enjoy more control over your unit and the land it stands on. This implies you can carry out renovations and structural changes.
Since buying a property in Dubai is a significant financial commitment, it’s imperative to do deep research beforehand. To ensure you have the necessary funds to purchase a home, villa, or apartment, consider taking help from a reputable real estate agent.