The new real estate decrees issued by Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE in his capacity as Ruler of Dubai, are expected to attract more foreign capital to this sector. It is also expected to open a wide field for a large segment of investors wishing to enter the market and diversify their investments, especially small investors.
On Wednesday, Sheikh Mohammed issued Decree No. 22 of 2022, approving the privileges of real estate investment funds in Dubai. Real estate funds are considered one of the best low-risk investments.
This was followed by Decree No. 23 of 2022 regulating the granting of a Musataha right on commercial lands in the Dubai, with the aim of regulating the process of exploiting commercial lands in the city.
Decree 22 established the “Real Estate Investment Funds Committee” to determine the areas and real estate located outside non-citizens’ ownership areas in which the investment funds may own absolute ownership that is not restricted by time, or use or lease for a period not exceeding 99 years, as typically is the case.
It also specified the conditions and procedures for registration in the Real Estate Investment Funds Register.
The most important of which is that the fund be licensed by the competent authority, which the decree defines as the authority competent to license and regulate real estate investment funds in accordance with the legislation in force therewith, and includes the Securities and Commodities Authority and the Dubai Financial Services Authority in the Dubai International Financial Center, provided that the value of the real estate assets owned by the Real Estate Investment Fund at the time of submitting the application for registration in the Register shall not be less than 180 million dirhams, and that the fund, at the time of submitting the application for registration in the Register, shall not be suspended.
The decree also specified the cases in which the fund is removed from the real estate investment fund register.
The law aims to enhance Dubai’s position as a global destination for real estate investment, and to provide incentives to encourage real estate investment funds to invest in various real estate projects in Dubai, as well as attracting international real estate investment funds to practice their investment activities in the real estate sector in the city. This is in addition to increasing investment in the real estate market, by achieving a long-term capital return for shareholders in real estate investment funds.
The importance of this law comes is that it was issued at a time when the real estate market is witnessing a great recovery in terms of real estate transactions, volume and value, with the government benefiting from growth prospects by issuing progressive policies including convenient visa regulations and easy market entry for foreign investors.
According to a report released by JLL last week, Dubai ranked first in the world in terms of improving real estate transparency in the period 2020-2022. Recent laws indicate that the UAE considered the real estate market a critical component of its broader strategy of economic diversification.
Decree 23
Decree 23 also regulates the use of commercial land in Dubai and stimulates investment in the real estate sector.
The Dubai Land Department will be concerned with setting standards and rules that ensure optimal use of commercial lands approved for granting a Musataha right.
A musataha right gives its owner the right to erect a building or plantation on the land of others, for a specified period. This period may be renewed by agreement between the owner of the commercial land and the investor enjoying this right.
The decree stipulated that the term of the Musataha right shall not exceed 35 years, and this period may be extended with the consent of the owner, provided that its total term shall not exceed 50 years.
The Musataha holder will be subject to a number of rules and regulations during the term of the agreement, including being registered with the Dubai Land Department or the Dubai International Financial Centre. The land owner must also obtain prior approval from the land owner before changing the commercial use of the land.
