Freehold vs Leasehold Property in Dubai
When it comes to real estate, Dubai provides enormous opportunities for a profitable investment. The tremendous growth that the real estate market of Dubai has gone through has resulted in immense diversification of properties, primarily through the debate of freehold vs leasehold property in the city.
Over the past several decades, Dubai has emerged as a leading metropolitan city that is always topping the charts of the most sought-after property destinations in the world. In the process, it has rightfully become the face of the Middle East to the world. However, making a long-term investment in a property requires having the utmost awareness of the possibilities of the subject of your property. Not to mention, you also need to understand the rights of owning the apt type of property for you.
Keeping all these in mind, we are exploring the two broad divisions of property in the city – freehold and leasehold. From understanding them closely by identifying their pros and cons to finding the best areas in Dubai to invest in them, we are covering everything in this space. At the end of the discussion, we are certain that you will be able to make a wise choice in determining which investment is going to suit your needs the best.
Understanding Freehold and Leasehold Property
The first order of business is to understand both freehold and leasehold properties at their core which will serve as the foundational pillar of your decision-making process. So, let’s get into it.
What is a Freehold Property?
In the world of real estate, a freehold property refers to a type of property over which the owner has complete ownership rights. The ownership of such properties is not limited by any time constraint. The owner not only enjoys full ownership over the home but also the land that the property stands on. Investing in a freehold property gives the owner the complete right to freely occupy, lease, or re-sale the property on their own will.
What is a Leasehold Property?
In simple terms, leasing refers to a financial arrangement under which a person pays to use a property or land for a set amount of time. Therefore, a leasehold property in Dubai means a type of property that one can buy with the right to live in it for a pre-defined set of time, usually kept at 99 years or less. A leasehold property doesn’t provide the right to the property or the land, but just the permission to lease it from the freeholder, who is the legal owner of the property.
Difference between Freehold and Leasehold Property in Dubai
Now that we have our basics clear about freehold and leasehold properties in Dubai, it is time to dig a little deeper and find out the differences between the two. To help you understand the differences minutely, we are going to assess each of them through the lens of the following vital aspects that will govern your investment decision.
Right to Ownership
Freehold properties provide complete ownership of both the property unit as well as the land it stands on. However, leasehold properties offer only limited ownership of the property unit and no right over the land it stands on.
Time Length of Ownership
There are no restrictions over the time length of ownership of a freehold property. On the other hand, leasehold properties can only be owned for a pre-defined time period, which usually doesn’t extend beyond 99 years. Residential or commercial leaseholds can be renewed at the discretion of the freeholder.
Control over Property
A freeholder gets full control over the property and if they want, they can live in it, lease it, rent it, or even re-sale it. They also get to inherit it and modify it as per their choice. As for a leaseholder, there is limited control and any sale, transfer, or major modifications that they want to make will require the approval of the freeholder.
Inheritance Ability
While freehold properties can be passed on to the heirs of their owners, leasehold properties can’t be inherited and after the expiry of the lease term, reverts to the freeholder.
Visa Eligibility
Freehold properties are eligible for residency visas of two to ten years that are renewable on expiry. Leasehold properties, however, usually don’t enjoy the benefit of being linked to any visa eligibility.
Maintenance Responsibility
When it comes to freehold properties, the maintenance responsibilities are completely of the owner. Leasehold owners just might have to handle small structural repairs but the overall maintenance responsibility will remain with the freehold owner.
Pros and Cons
The richness of Dubai is reflected through the high quality of life it provides to its residents, which is why its real estate market is a stable and reliable one. But making the right choice of property for your investment requires you to thoroughly understand the advantages as well as the disadvantages of both freehold and leasehold properties.
Advantages of Buying Freehold Property in Dubai
Freehold properties bring with them a wide range of advantages, making them popular options for profitable investments. Here is a look at some of the advantages of buying freehold properties in Dubai.
Complete Freedom
Evident by their name, the biggest advantage of buying freehold properties is that you get complete freedom to live in, lease, rent out, or re-sale your property. The stable economy of Dubai ensures capital appreciation, which means the value of your freehold property is going to increase over time, giving you more options to profit from your investment.
Ease of Property Inheritance
Freehold properties can be passed on to the heir after the owner passes away. This means that the property will remain within the family and your investment will be sealed with a tight-net security. This aspect of perpetuity heightens the appeal for freehold properties, especially for high-net-worth families.
Qualifies for Long-term Residency Visa
When you buy freehold properties in Dubai, it makes you eligible for various long-term residency visas. These visas offer various types of residential programs for foreign citizens that range from a 2-year period to a 10-year period, thanks to the UAE Golden Visa. You will also be able to sponsor your family through these visas.
Wide Range of Location Options
There is a diverse choice of options of locations for freehold properties throughout the city. With scenic beauty, uninterrupted views of the stunning skyline of the city, and the ease of transportation to major business hubs, you can have your pick at your convenience.
Disadvantages of Buying Freehold Property in Dubai
With so many pros of freehold properties, we can’t ignore addressing the disadvantages they carry. Here is a look at some of the disadvantages of buying freehold properties in Dubai.
Requires Higher Budget
Freehold properties are on the high end of the budget. With so many advantages that they bring, they are undeniably the more expensive ones in the real estate market of Dubai, often catering to a niche group of investors.
Sole Responsibility for Property Maintenance
If you are buying a freehold property in Dubai, it is your sole responsibility to bear the expenses for the maintenance and upkeep of the unit. Even if you are leasing or renting your property, you can’t rely on or ask your leaser or tenant to pay for the repair or renovation costs.
Advantages of Buying Leasehold Property in Dubai
Even though many people might be apprehensive of leasehold properties at first glance, they do come with some convincing selling points that make them a smart investment option. Here is a look at some of the advantages of buying leasehold properties in Dubai.
Economical and Affordable
If you are looking to buy a property in Dubai within a tight budget, then leasehold properties can come to your rescue. These are economical and affordable options that can fit into your budget without compromising too much on luxury.
Low-maintenance Hassle
When you buy a leasehold property, you can rest assured that you will face minimal to no maintenance hassle. It is the freeholder’s responsibility to keep up with the maintenance of the property unit. So, unless you do any major damage to the unit, you don’t have to deal with the hassle of its repairs or upkeep.
Ease of Contract Renewal
Another underrated advantage of buying a leasehold property is the convenience of renewing the contract at the expiry of the lease term. This allows the leasehold owners to continue to live in the house. By maintaining a healthy relationship with the freeholder and being a responsible leaser, you don’t have to run the risk of moving out.
Disadvantages of Buying Leasehold Property in Dubai
Leasehold properties have their limitations that you should be aware of before deciding to invest in them. Here is a look at some of the disadvantages of buying leasehold properties in Dubai.
Limited Freedom on Renovations
A major downside to buying leasehold properties is the lack of freedom to renovate them as per your personal style. If you want to remodel or make alterations that will result in structural changes to the property unit, you have to take the approval of the freeholder first and they can always deny the permission if they wish to do so.
Restriction on Subletting
Leasehold properties usually are not allowed to sublet. If you do so, you need to seek the approval of the freeholder otherwise you might be liable to face legal charges. In some leasehold properties, you even need to get permission to keep pets.
Best Areas in Dubai to Invest in Properties
Apart from the relaxed taxation policies and wide employment opportunities, a major reason that draws people to invest in the properties of Dubai is the high Return on Investment (ROI). Some of the top property developers have marked their presence in various areas with high ROI.
Now that you know the advantages and disadvantages of both types of properties, it is time to go location hunting. To help you figure out the best location to buy property, we have curated a list for both freehold areas as well as leasehold areas in the city.
Best Freehold Areas in Dubai
Whether you want to invest in a readymade property or an off-plan property on a freehold basis, there is no lack of amazing locations with strategic benefits for you to choose from. Studio apartments, multi-room apartments, penthouses, townhouses, villas, and commercial properties of epic proportions are available for freehold ownership throughout the city.
Although Emiratis and Gulf Cooperation Council (GCC) citizens can purchase and own freehold properties in most areas of the UAE, except free zones, there are ample places for foreigners to buy properties in Dubai. However, foreigners can only buy freehold properties in Dubai in designated areas.
Some of the most notable neighborhoods where you can buy freehold properties are as follows.
- Downtown Dubai
- Business Bay
- Dubai Marina
- Jumeriah Lake Towers (JLT)
- Jumeirah Beach Residence (JBR)
- Jumeirah Village Circle (JVC)
- Dubailand
Best Leasehold Areas in Dubai
Leasehold properties are available for purchase in various communities spread all across Dubai. These properties are very popular with expats who are moving to Dubai with their families for the first time or those who have a tight budget. For foreigners, it is possible to buy leasehold properties in areas that are designated for foreign ownership.
Some of the most notable neighborhoods where you can buy leasehold properties are as follows.
- Dubai Silicon Oasis
- Mirdif
- Deira
- Bur Dubai
- Al Warqaa
- Umm Suqeim
- Al Barsha
How to Choose Between Freehold and Leasehold Property?
Whether you are an Emirati or a foreigner who is looking forward to purchasing properties in Dubai, it is advised that you do so only from reliable and reputed real estate developers. Now, coming to the most vital debate between freehold vs leasehold property in Dubai, your choice will boil down to your budget, needs, and requirements.
For those of you who are not constrained by a budget and can splurge, going for a freehold property is a smart idea. Yes, it is true that you will have to bear the maintenance and upkeep of the unit, but you will have complete freedom to renovate and remodel it as per your wants. You can even freely lease, rent, or re-sale it.
If you have long-term plans to reside in the city and want to keep the legacy of the property in the family through easy inheritances and re-inheritances, freehold properties are ideal. The stable economy of the city allows for heavy capital appreciation resulting in profitable investment for freehold properties.
On the other end of the spectrum, if you are limited by a budget and don’t want to deal with the maintenance and upkeep of the unit, then opting for a leasehold property is ideal. These properties are perfect for those who plan to stay in the city for a short or pre-definite time. But, please note that you can’t remodel or renovate the unit without the approval of the freeholder.
To Conclude
Both freehold and leasehold properties come with their pros and cons. While freehold properties offer permanent ownership and complete rights to the owner to live, lease, rent, or re-sale the property unit, leasehold properties provide affordable options and the chance to renew the lease contract upon expiry of the lease term.
We hope the aforementioned classifications of the pros and cons of both these types of properties will help you in making a smart and well-informed investment decision. Dubai offers plenty of strategic locations for you to own either of these property types. So, consider every aspect carefully and own your dream property in this affluent metropolitan city.
FAQs
Questions about the Freehold and Leasehold Properties
Is Dubai property freehold or leasehold?
In Dubai, both freehold and leasehold properties are available for purchase in various areas of the city.
What will happen after 99 years of leasehold in Dubai?
After 99 years of leasehold in Dubai, the ownership of the property unit will automatically get transferred to the freehold owner. There are options available for renewal of the lease contract if both the freeholder and leaser can come to an agreement.
Is freehold better than leasehold?
This is extremely subjective since both freehold and leasehold properties come with their own set of advantages and disadvantages. If you are looking for permanent ownership that offers the complete right to live, lease, rent, and re-sale the property unit with provision for inheritance, then a freehold property is definitely better than a leasehold property.
However, leasehold properties are more affordable and their owners don’t have to worry about the maintenance and upkeep of the property unit. Finally, they can always request for a renewal of their lease contract at the expiry of the term.
Can foreigners buy freehold property in Dubai?
Yes, foreigners can buy freehold property in Dubai but only in designated areas.
Can a foreigner have 100% property ownership in Dubai?
Yes, a foreigner can have 100% property ownership in Dubai as long as they are buying property in designated freehold areas of Dubai.
What are the benefits of buying freehold property in Dubai?
Freehold properties in Dubai offer a wide range of benefits to the owners. First of all, the owners get complete ownership and they can live, lease, rent, or re-sale the property unit at their convenience. They can renovate and remodel the property however they want. Not to forget, upon the passing away of the owner, the property can be inherited by their heir and stays within the family.
Can you own a house in Dubai forever?
Yes, you can own a house in Dubai forever but it can only happen to someone who owns a freehold property.