Good news for all the real estate enthusiasts who are watching this right now. If you don't know about Abu Dhabi's freehold law that was introduced earlier this year, then I am going to break it down for you today.
Abu Dhabi government announced a new freehold law that allows foreigners to own freehold property in designated zones.
As with most of the real estate regulation amendments we’ve seen within the country in the past few years, this is also being done to increase foreign direct investment and boost the economy.
Previously, only GCC nationals could own freehold property with foreign investors in Abu Dhabi were previously limited to 99-year leases.
What are these designated areas?
Raha Beach, Reem Island, Al Reef, Lulu Island, Saadiyat Island, Yas Island, Saih As Sidirah, Masdar City, Al Maryah Island, Al Falah, Fahed Island, Hiid Al Saadiyat, Al Jurf in Ghantoot, Nurai Island, Jubail Island, Al Shamkha and Palace Breakwater.
This law is likely to have a huge impact on banks and real estate developers.
I’m going to quote Tariq Imam, who is the Head of Real Estate in Middle East at Clifford Chance.
“It [the freehold law] will have an impact on banks, because banks financing those developers will have to do less due diligence. They will find these projects perhaps more bankable. They will find individual home financing more bankable, because you’re dealing with investors who have a freehold interest lease. So I think there’s definitely an impact on the real estate finance side.”
Not saying that it is some sort of competition but the legal changes will also help to level the playing field between Abu Dhabi and Dubai, where foreigners are already allowed to buy freehold property in investment zones.
There definitely are a lot of advantage of buying freehold property including:
Basically you have more control over the property as compared to a leasehold contract.
And, under a leasehold agreement, an owner takes the title of a leasehold property for a fixed term but does not own the land on which the property is built, while freehold ownership offers an investor a direct title of ownership of the property, and the land on which it is built.
But, one question that remains is what’s going to happen to existing real estate owners?
Once there is clarity from the government on this, I will make sure that we bring the answer to you.
(Source: Arabianbusiness.com YouTube channel)