What does freehold ownership mean?

The owner of a freehold title of real estate enjoys the most superior form of private ownership. A freeholder is considered to be the absolute owner of the land and buildings comprised in his title; he has the right to occupy, use and enjoy his property forever ("in perpetuity") or until he transfers the title to a new owner, and his heirs are entitled to inherit his title upon his death. Nevertheless, a freeholder does not have total freedom to do what he wishes on his land.

What are the restrictions or external curtailments on freehold ownership?

  • The most obvious form of external curtailments are the public controls- a freeholder must comply with all applicable government laws which combine to control the use of and activities upon his property.
  • The second form of external curtailment is of a more private nature and consists of restrictions placed upon the freehold title. For instance, neighbors may enjoy rights of way over pathways crossing the freeholder's land. The rights that others enjoy over privately owned property are owned as "easements".
  • A further form of title restriction is the "covenant". A covenant may be an obligation to do something, such as an obligation to keep the buildings on the land in good condition or an obligation to make a financial contribution to some shared facility such as a car park etc.

Does one have to be physically present in UAE to buy a property here?

It is possible for the prospective buyer to give Power of Attorney to a person to handle all the aspects of the purchase on their behalf. It is not necessary that one has to be present in UAE to conclude the deal. But it is advisable that they check all the documentation and ensure that everything is clear before signing the deal.

Which realtor should I use?

Choose a realtor who has time to run through all the developments on their books, has an overall understanding of the UAE market, a local office, knowledge of the legal framework, concise brochures, models and floor plans, details of the contract as well as schedule of payment terms. It is beneficial to have a look at all the developments in UAE to determine which one fits your needs from a perspective of timescale to completion, cost and purpose (i.e. investment or residential, freehold /leasehold). If you are not getting sufficient information from your realtor, fine one that is more experience.

Can I put the property in my Will?

Yes, but if you are looking to ensure the property passes directly to your spouse, be aware that wills are not recognized under local Shariah Law. It might be worth considering some form of offshore structure to purchase the property so that it passes within your estate encumbered.

Is there any Capital Gains Tax on the sale of the property?

Not yet.

What is an offshore company?

An offshore company is a business entity that is formulated in a low tax or tax jurisdiction for the purposes of legally minimizing any type of tax payment and improving your wealth management. "A wealth management tool that can be utilized by anyone legally and legitimately."

Why open an offshore company?

Primarily one would open an offshore company to gain confidentiality over their financial affairs and grow wealth without intrusion. Offshore companies can eliminate or minimize many types of tax payments such as: Capital Gain Tax, Death Duty, profits on business earnings and property sales. An offshore company legitimately assists you in gaining confidentiality over your financial affairs and growing your wealth.

What do I get with my UAE Offshore Company?

In terms of structure you will receive the following from First Offshore:

  • A registered Agent-A company cannot be formed without one.
  • A registered virtual office from which your Offshore Company trades from.
  • A full corporate and personal bank account with a local (non-exchange) bank. Products such as "Gold Cards" and debit cards can be arranged.

Can I buy using an offshore company?

This is certainly possible, and using a UAE offshore company can also be explored.

Can a property be owned by an offshore company?

Yes. It is not uncommon that offshore companies are used as property-owning vehicles for property in UAE. UAE has recently introduced regulations that allow offshore companies to be set up in two distinct "free zones". These free zones have broadly similar regulations that permit offshore companies to own property in designated or approved developments. Set-up costs (of a few thousand dollars) and annual renewal costs (of a few hundred dollars) are relatively low although there are several restrictions on what these companies can do in UAE. The regulations require a Registered Agent to be in UAE and several firms of lawyers and accountants are registered to act as such.

If I own the property in my own name, what happens to that property upon my death?

When buying in UAE, in the event if death, the property does not necessarily pass to the wife since the Sharia Law (the governing law of UAE) determines otherwise, as laid down in the Quran. In order to ensure the property passes on to those you wish, an offshore company can be established with the spouses as Directors. In the event of their demise the shares of company are passed on to the surviving spouse and beneficiaries. Although the spouse has died, the offshore company has not; thereby an internal transfer of shares circumvents this potential Sharia hiccup.

Can I get finance in the UAE?

Yes if you are a resident, but terms differ between the limited numbers of local lenders. However finance can be arranged through overseas lenders if you have assets overseas too. Many property investors with assets overseas (property, income, investments) have taken advantage of favorable international interest rates. For example, someone with property in UK may be able to release equity to a maximum of 80% of the value of their property (less any outstanding mortgage), to finance all or part of their property purchase in UAE. Interest rates can be secured as low as 3.5% in sterling terms as opposed to 6.5% in Dirhams locally.

What banks in the UAE are currently offering loan on properties bought off-plan?

The banks currently offering loans are HSBC, Amlak, UAE Islamic Bank, Rak Bank, Mashreq Bank and Tamweel.

Do I need insurance for my Mortgage?

Most lenders (banks and building societies) will require some form of protection for the loan. This makes sense since you want your property paid off in the event of your death or diagnose of a serious/terminal illness. Banks on the hole do not like repossessing property and would prefer the loan to be repaid from an insurance policy should a serious event occur. Seeking the right insurance is important since it comes in many forms. Whole of Life, term and Endowment policies are all widely available in the UAE. Get advice on how to determine which one is right for you. Similarly, it pays to use a broker since they normally secure terms well below that which is offered directly by most banks.

What are the opportunities for rental yield and capital growth?

In the rental market, there are issues of over-supply, and as far as capital appreciation is concerned, there is concern over build-quality and built-duration. Neither of these considerations should be over-looked when considering the investment potential. Having stated that, real estate experts believe that rental yields and the prospects of capital growth are excellent in UAE property market.