What Is The Process Of Purchasing An Off-Plan Property In Dubai For Offshore Investors?
Dubai has been an attractive property market for offshore investors for some years. Whether you decide to make the move to Dubai or are simply looking to invest in Dubai there are several approaches you can take when buying an off-plan property project in the UAE.
Buying a property in Dubai remains an attractive investment diversification option and a good investment. So, if you’re wondering if offshore investors are welcomed when buying an off-plan property project in the UAE, the answer is most certainly ‘YES’!
Offshore Investors Ownership Restrictions
Freehold titles can only be registered in the name of non-GCC nationals in areas designated for that purpose. These currently include The Palm Jumeirah, Emirates Hills, The Meadows, The Lakes, The Springs, Dubai Marina and Jumeirah Lakes Towers.
Most notably, they exclude most of Deira, Bur Dubai, Jumeirah, and Umm Suqeim.
Similarly, it is no longer legally allowed for property to be registered with the DLD in the name of an offshore company other than one registered in the Jebel Ali Free Zone.
Despite these restrictions, there remain several attractive options when buying an off-plan property project in the UAE for offshore investors. Let’s explore the most common ownership structures and review the advantages and disadvantages associated with each approach.
Still, the most common form of property ownership amongst offshore investors is to have the title registered in your personal name.
It’s simple, quick and relatively easy to buy and sell your off-plan property. You simply go to the Dubai Land Department (DLD) with your passport and sign the documents. Alternatively, you or appoint a representative under a binding Power of Attorney to sign on your behalf.
If the speed of buying and selling is important, individual ownership enabled active off-plan investors to move in and out of property investments with unimpeded agility.
Inheritance has always been a slightly murky area in Dubai as individual property ownership exposes you to the uncertainties of Dubai Courts decision on succession issues regarding the property.
Today, however, a legally registered Sharia-compliant will negate most of these issues. For some nationalities, there are also tax implications with rental income and capital gains both possibly falling within the legislative reach of foreign tax regimes.
Joint Individual Ownership
This is most commonly seen in the case of married couples or syndicates coming together to set up an investment portfolio of Dubai properties.
It benefits from the same advantages as single individual ownership. It is simple, quick and easy to transfer the off-plan title, albeit you have two or more people to coordinate with legally rather than one.
The same concerns regarding inheritance and tax issues remain as with individual ownership. In addition, you should be aware that unlike some jurisdictions where property jointly owned by spouses does not automatically revert to the full ownership of the surviving spouse. In Dubai, the deceased’s share is passed on to his or her heirs and not the surviving spouse.
Again a registered Sharia-compliant will avert most of these issues.
Offshore Company Ownership
This was a popular form of ownership where investors registered real estate assets in the names of corporate entities established in traditional offshore jurisdictions such as the British Virgin Islands and the Cayman Islands.
Today, unless your offshore vehicle is registered in the Jebel Ali Free Zone it is not permitted for the purposes of owning an off-plan property in Dubai.
Corporate ownership avoids the uncertainty of local succession laws. As the company never dies so there is no local inheritance play. Some owners have sought to transfer the shares in the corporate entity to buyers, rather than transfer the property, thereby avoiding the transfer fee otherwise payable to the DLD.
Setting up the right offshore Jebel Ali Free Zone structure can take time and is document intensive. There are establishment fees payable to the corporate service providers and, thereafter, annual fees to keep the company in good standing on the offshore register.
The critical thing to understand is that not all properties in Dubai are available for sale to foreign or offshore investors. The only properties a foreign investor can legally buy are in special designated “Freehold” Areas.
Article 4 of the Law No.7 ‘Property Law’ permits non-UAE and non-GCC nationals together with companies to own freehold property, the right for a long lease or a use right up to 99 years in the areas of the Emirate of Dubai designated for foreign ownership under regulations delivered by the Ruler of Dubai, the ‘Designated Areas’.
The ownership rights in ‘Designated Areas’ in Dubai depend on the type of the company (offshore or onshore) and the Emirate it is incorporated in.
Currently, offshore companies incorporated in the Jebel Ali Free Zone Authority can hold a property in designated areas in Dubai.
The DMCC (Dubai Multi Commodities Centre) offshore company also has the right to buy a property in Dubai.
However, other offshore companies registered in the UAE in emirates such as Ras Al Khaimah International Corporate Centre and Ajman cannot buy property in Dubai. They can, however, buy property in other Emirates.
The same applies to other international jurisdictions such as British Virgin Islands, Seychelles or Hong Kong. They also are prohibited from buying property in Dubai.
The Process Of Buying An Off-Plan Property Project In Dubai
If buying directly from the developer always check that the developer, the project, and the project’s Escrow account are all registered with RERA. The developer will ask you to sign a Sale Purchase Agreement and pay the initial deposit.
The subsequent payments will follow as per the schedule outlined in the payment plan set out in your contract.
Ensure your developer registers your property with Dubai Land Department via the Oqood registration portal. Depending on what you negotiate with the developer the developer may pay the full fee for registering your apartment or villa, pay half of the cost, or more commonly, you as the buyer will need to pay the full registration cost. Typically this amounts to four percent of the purchase price.
The following documents are typically required when purchasing an off-plan property in the UAE:
- Passport copy
- Proof of current address
- Salary certificates or evidence of regular income
- Bank account statements for three to six months, showing salary credits
- MOU for the property sale
- Title deed of the property being purchased
- Seller’s passport copy
- No-objection certificate (NOC) from the developer
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Buying an off-plan property project in the UAE comes with its own set of risks. For offshore investors, there is the added complication of not being allowed to use any corporate entity that is not registered in the Jebel Ali Free Zone. However, that aside the process of purchasing an off-plan property is much the same as for a resident.