UAE real estate market is a significant contributor to the country’s economy and one of the most sought-after property markets^[1] in the world. The real estate market in the UAE, and specifically in Dubai, is an important sector of the country’s economy. It has experienced rapid growth and development over the past few decades with impressive infrastructure and high-quality construction, attracting local and international investors and contributing to the diversification of the economy. The city offers a diverse range of properties, including luxury apartments, villas, townhouses, and commercial spaces.

One of the ways that property investors can invest in the UAE’s property market is direct investment. It involves the ownership of the physical property, either for owner-occupation (as an end-user) or as an investment (to be rented out). The ways for direct property investments are:

1- Purchasing a property

One of the most common ways of direct property investment is purchasing a property in the UAE. This can be done either through cash or through a mortgage. The criteria that should be considered in this regard are as follows:

• Location: The location of the property is one of the most important factors to consider when making a direct investment in the UAE. Some of the popular areas to invest in are Dubai Marina, Downtown Dubai, and Palm Jumeirah. It is important to research the area and understand the potential rental income and capital appreciation in the area.
• Budget: Determine your budget for the property and factor in additional expenses such as taxes, property maintenance, and management fees.
• Property type: Consider the type of property that you want to invest in. Whether it is a villa, apartment, or commercial property, each type has its own benefits and risks.
• Developer reputation: Do your research on the developer’s reputation and track record. Ensure that the developer has a good reputation and has delivered high-quality properties in the past.
• Financing options: If you are unable to pay for the property in cash, research and compare financing options available from banks in the UAE. Compare interest rates and repayment terms.
• Property management: Consider hiring a property management company to handle tenant placement, rent collection, and maintenance of the property. This can save time and effort and ensure that the property is well-maintained.
• Legal requirements: Ensure understanding of the legal requirements for purchasing a property in the UAE. For example, the laws and regulations governing real estate in Dubai are well-established. For instance, Real Estate Law No. 7 of 2006, also known as the Land Registration Law in the Emirate, outlines that UAE citizens and citizens of Gulf Cooperation Council (GCC) countries are permitted to buy real estate anywhere in Dubai. However, foreign nationals can only purchase properties in designated “freehold” areas through either freehold or leasehold ownership structures.

2- Off-plan property investments

Involve purchasing a property that is still under construction with the expectation of capital appreciation or rental income once the property is completed. This can be a good investment opportunity as prices may increase once the property is completed. when making a direct investment in off-plan property in the UAE, considering some criteria is highly crucial:

• Research the developer: Research the developer’s reputation and track record, including previous projects and delivery timelines. Choose a developer that has a good reputation and a history of delivering quality projects on time.
• Location: Properties in areas with high demand, such as popular tourist destinations or business districts, are likely to have a higher potential for appreciation.
• Payment plan: Developers usually offer flexible payment plans for off-plan properties in the UAE. Consider the payment schedule and ensure that it suits your financial situation.
• Completion date: The completion date is important to consider when investing in off-plan property. Ensure that the developer has a realistic timeline for completion and factor in any potential delays.
• Contract terms: Review the contract terms carefully, including the payment schedule, handover date, and any penalties for delays or cancellations.
• Risks: Understand the risks associated with investing in off-plan property, including delays in construction, changes in market conditions, and potential issues with the developer or the property itself.
• Legal requirements: Ensure that you understand the legal requirements for purchasing off-plan property in the UAE. This includes registering the property and paying taxes. Concerning the Law No. (7) of 2013, developers are required to register their projects with the Dubai Land Department and obtain all necessary permits and approvals before selling off-plan properties. The law also requires developers to deposit 20% of the project’s value with the Dubai Land Department to protect investors’ funds. Moreover, Law No. (4) of 2019 Concerning the
  Real Estate Regulatory Agency mandates that developers must disclose all necessary information to investors, including project details, timelines, payment plans, and any potential risks associated with the project.

3- Rental properties

Purchasing a property with the intention of renting it out is also a direct property investment. This can generate rental income and long-term capital appreciation. For investing in rental properties also the location, property type that is suitable for rental income, such as apartments or villas, rental rates by considering the competition and the demand for rental properties in a specific area, hiring a property management company which can be helpful in managing the property are substantially important.

In addition, ensure that you understand the legal requirements for renting out a property in the UAE. Based on the Dubai Tenancy Law No. 26 of 2007, landlords have to enter into a written rental contract with their tenants, which must include certain details such as the rent amount, payment schedule, and the duration of the lease. They can also request a security deposit from tenants, which must be refunded at the end of the lease term unless there are damages to the property or unpaid rent.

In conclusion, direct investment in the UAE real estate can be a lucrative opportunity for investors looking to diversify their portfolios and take advantage of the region’s growing economy and is a viable option for investors who have done their due diligence, understand the market, and are willing to take on some level of risk. Finally, it is important to note that the investing process in the UAE can be complex, and you may want to seek the advice of an expert lawyer to guide you through the process.

[1] “Sought-after property markets” typically refer to geographic locations where there is a high demand for real estate, and properties tend to command premium prices.

Niloofar Foroozanfar