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Insights - Freehold vs. Leasehold in Dubai: What Buyers Need to Know
Freehold vs. Leasehold in Dubai: What Buyers Need to Know
- Better Informed
- 20 May, 2025
- 5 min read
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Dubai has become one of the hottest hotspots for investors worldwide. The new developments in the different parts of the city continue to increase and provide the locals and foreigners with plenty of choices to invest, purchase, or rent. Although the purchasing process is no easier in the Emirates, it has its own rules and regulations that one must follow. Also, there are many region-specific aspects that you need to understand before any action. But first of all, you need to know the difference between the freehold and leasehold areas in Dubai.
This blog contains all the leasehold and freehold area details a buyer should know before buying a property in Dubai.
What are leasehold and freehold in Dubai?
The main difference between freehold and leasehold is how much ownership you get and how long you hold it.
Freehold Ownership
When you buy a freehold property in Dubai, you gain complete and permanent ownership. This ownership covers the building itself and the land on which it is built. Think of it as owning the property outright, forever. Because of this full ownership, you have a wide range of rights. You can sell the property whenever you want. You can rent it to others. You have the freedom to make changes or renovations, as long as you follow the local rules and the developer’s guidelines.
Leasehold Ownership
Buying a leasehold property is different. It means you are buying the right to use and occupy a property for a specific amount of time. This period is usually long-term, often up to 99 years, but it can be shorter. During this lease period, you have the right to live in the property or rent it. However, you do not own the land underneath the property. The land remains owned by the original owner, who is called the freeholder.
Key Differences You Need to Know
Besides the basic definition of ownership, there are several other important ways freehold and leasehold properties differ in Dubai:
Price Stability and Value
Freehold properties are generally seen as a more stable and valuable investment over time. Because you own both the property and the land permanently, their value tends to increase. Leasehold properties might have a lower initial price, which can be attractive. However, as the end of the lease term gets closer, the value of a leasehold property might decrease.
Ground Rent Implications
A significant financial difference is whether you have to pay ground rent. If you own a freehold property, you do not pay any rent for the land. It is yours completely. However, if you own a leasehold property, you might have to pay ground rent. This is a regular payment made to the freeholder for the use of their land.
Location and Designated Areas
In Dubai, you can only buy freehold properties in specific areas that the government has designated as freehold zones. Similarly, leasehold properties are only available in certain leasehold areas.
Inheritance and Future Planning
One of the most significant differences for many buyers is the ability to pass the property on to their family. This ensures your investment can benefit your family in the future. However, with leasehold ownership, this is generally impossible. When the lease ends, the property goes back to the freeholder, so you cannot pass on ownership to your heirs.
Freedom to Make Property Changes
If you own a freehold property, you have more freedom to make changes or renovations to it. Of course, you still need to follow the local building regulations and any guidelines set by the property developer. For leasehold properties, you usually need to get written permission from the freeholder before you can make any significant changes to the structure or layout of the property.
The Advantages of Choosing Freehold Ownership
Freehold ownership in Dubai is often the preferred choice for many buyers, and there are several good reasons for this:
- As a freehold owner, you have the right to remodel or renovate your property to suit your tastes and needs. You just need to make sure you follow the local regulations and any rules set by the developer of the community.
- One of the biggest benefits of freehold is that you can pass the property on to your children or other legal heirs. This provides long-term security and the potential for building wealth that can be passed down through generations.
- Freehold areas in Dubai offer a diverse range of properties to choose from. Whether you are looking for an apartment, a townhouse, or a villa, you are likely to find freehold options that meet your budget and lifestyle preferences.
- Freehold properties in Dubai have shown a strong tendency to appreciate over time. This makes them an attractive option for long-term investment.
- As a freehold owner, you have complete control over your property. You have the right to decide when to sell it, who to rent it to, or when to occupy it yourself, without needing to obtain permission from anyone else.
The Advantages of Choosing Leasehold Ownership
Despite the many advantages of freehold, leasehold ownership can be a suitable option in certain situations:
- The upfront cost of buying a leasehold property is lower than that of a comparable freehold property. This can make it a more accessible way to enter the Dubai real estate market.
- Leasehold owners often have less responsibility for significant structural repairs and maintenance of the property. These are often the responsibility of the freeholder, particularly for the common areas of a building or community.
- If you are not planning to live in Dubai permanently or if you only expect to stay for a specific period, a leasehold property with a term that matches your intended stay might be a practical choice.
- Developers who are selling leasehold properties might offer various incentives to attract buyers. These could include flexible payment plans, options to pay after the property is handed over, and guarantees on rental income for a certain period.
Understanding the Legal Aspects
The Dubai property market operates under a well-defined and transparent legal system. It is crucial to have a basic understanding of the laws that govern both freehold and leasehold properties.
The Legal Framework for Freehold Properties
The primary law governing freehold ownership in Dubai is Article 4 of Dubai Law No. 7 of 2006. This law clearly defines who is eligible to own freehold property in Dubai, which includes citizens of the UAE, GCC nationals, companies owned by them, and public joint stock companies. Importantly, it also allows non-UAE nationals to own freehold property in designated areas across Dubai.
Rules and Limitations of Leasehold Ownership
While there is no law specifically for leasehold properties, Dubai Law No. 26 of 2007 is applied, which is also known as the Dubai Tenancy Law. This law primarily deals with the relationship between landlords and tenants in all types of lease agreements in the UAE.
Popular Areas for Freehold and Leasehold Properties in Dubai
Your property's location plays a significant role in your lifestyle and its investment potential. Dubai offers distinct areas where you can find both freehold and leasehold properties:
Popular Freehold Areas
- Palm Jumeirah
- Downtown Dubai
- Arabian Ranches
- Dubai Marina
- Dubai Hills Estate
- Jumeirah Lake Towers (JLT)
- Jumeirah Village Circle (JVC)
- Al Jaddaf
- Sheikh Zayed Road
Popular Leasehold Areas
Conclusion
The choice between freehold and leasehold property ownership in Dubai depends on what you need and plan for the future. Freehold gives lasting ownership, more control, and the chance for value to increase over time. This often suits those wanting a permanent home and long-term investment. Leasehold can cost less at first and might work for shorter stays or specific investment plans. Think carefully about your money, how long you will stay, and what you want to achieve with your property. This will help you make the right choice in Dubai's property market.
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Frequently Asked Questions
Can owning freehold property help with getting a UAE residency visa?
Yes, owning freehold property in Dubai can make the owner eligible for a renewable UAE residence visa.
Can leasehold property in Dubai be passed on to heirs?
No, leasehold property in Dubai typically cannot be passed on to heirs; ownership reverts to the freeholder.
Can non-UAE nationals own freehold property in Dubai?
Yes, since 2002, the Dubai government has allowed non-UAE nationals to acquire freehold property in specifically designated areas across the emirate. This landmark decision opened up the Dubai real estate market to a global pool of investors.
Do freehold property owners in Dubai pay ground rent?
No, freehold property owners in Dubai do not have to pay any ground rent because they have outright ownership of the land on which their property is built.
What factors might make leasehold ownership a more appealing option for some buyers in Dubai?
Leasehold ownership in Dubai can be more appealing to buyers who have a more limited budget due to the generally lower upfront costs compared to freehold properties. Also, individuals who do not plan to stay in Dubai permanently might find the fixed-term nature of leasehold more suitable for their needs.
