Freehold on the Horizon: What a New Law Would Change

As 2002 begins, the question of foreign ownership hangs over every conversation about Dubai property. Expatriates have been buying villas and townhouses in the new master-planned communities for more than a year, and demand has been strong. What the market still lacks is a clear, formal statement of the rights that foreign buyers enjoy. Many in the industry now expect that statement to come soon, and it is worth thinking through what it would change.

From developer promises to legal rights

Today, a buyer's security rests largely on the reputation of the developer and on administrative practice. A formal freehold framework would turn those promises into legal rights. Foreign buyers would know exactly what they own, for how long, and how that ownership is recorded and protected. That is the single most important step towards a mature property market.

What would likely follow

• Designated areas: ownership would probably be permitted in specific zones, typically new communities, rather than across the whole emirate.
• A title register: a reliable record of ownership that buyers, banks and courts can rely on.
• Mortgages: banks would be more willing to lend to expatriates once ownership is secure.
• A resale market: buyers could sell to other foreigners with confidence.

Who would benefit

Expatriates already living in Dubai are the most obvious beneficiaries; many would prefer to own rather than rent. International investors, particularly from the UK, Europe, South Asia and Russia, would also find the market far more accessible. And the city itself would benefit from residents who are more committed to staying and investing for the long term.

Risks of a sudden opening

A rapid influx of foreign buyers could push prices up quickly and encourage speculation, particularly in off-plan projects. Without strong rules on developers and buyer protection, some purchasers could find themselves exposed if projects are delayed. A new law will need to be followed by regulation of developers, agents and the handling of buyers' money.

How to prepare

Clients who are interested in Dubai should use this period to understand the main communities, the leading developers and the practicalities of buying. When the law changes, the best opportunities in established projects may move quickly. Being ready, with legal advice and financing arranged, can make a real difference.

Our view

We believe a formal freehold framework is coming and that it will be the most important event in the history of Dubai's property market. We are preparing our clients for it now, while continuing to insist on careful due diligence in the meantime.