Home » The Legal and Financial Considerations of Abu Dhabi Real Estate
Abu Dhabi is the capital of the United Arab Emirates (UAE) and the second most populous city. Due to the migration of foreigners to the city to find employment, there has been an increase in industrial and commercial activities. This has also increased the demand for real-estate units for business and domestic purposes.
All real estate transactions have to be registered with the Abu Dhabi Land Registration Department (LRD). The Abu Dhabi Municipality takes care of the real estate transactions including the registration. The title certificate given by the LRD is considered the identity of property ownership under UAE law. A failure to register the property will mean that the ownership has not been transferred and the agreement between the seller and the buyer will not be enforceable.
The individuals and companies that own property in the UAE are divided into three groups:
UAE nationals and companies: UAE nationals and companies can hold land interests anywhere in Abu Dhabi.
Nationals of Gulf Cooperation Council (GCC) countries: These nationals can hold any land interests within the investment areas in the Emirati.
Foreign nationals and companies: These can hold certain land interests within the investment areas only.
There are 18 investment areas in Abu Dhabi where the GCC and foreign nationals can hold land interests. The Abu Dhabi Executive Council is allowed to designate certain individuals and companies with the same status as UAE nationals regarding land ownership.
What are the types of ownership in Abu Dhabi?
There are different types of ownership, Freehold ownership, Leasehold ownership and Jointly owned property.
This refers to the complete ownership over a particular property. The UAE nationals and companies can own real estate property in Abu Dhabi. The GCC nationals can own real estate property in the designated investment zones. Foreign nationals are allowed to own, sell, mortgage, purchase and lease property in the designated investment zones only.
The right to a portion of the proprietorship of the original land on which the construction is made is not allowed. Though foreigners can own apartment units and entire floors.
The investment zones in Abu Dhabi are Golf Gardens, Al Reef, Mangrove Village, Raha Beach area, Al Zeina, Al Bandar, Al Marana and Al Reem Island.
This refers to the property that can be taken on a lease from a freeholder for 99 years or 50 years. Lease property is available under 2 laws: Musataha and Usufruct. Musataha allows a 50-year development lease that allows you to build on undeveloped land. Usufruct allows foreigners to lease the property for 99 years.
The Musataha and Usufruct leases can be renewed for a period agreed upon by the two parties. This is allowed within the investment zones only.
Foreigners can also lease property without the Musataha and the Usufruct laws. Foreigners can lease property within the investment zone for a period not exceeding 25 years though the contract has to be registered with the Abu Dhabi Municipality.
Jointly owned property:
Jointly-owned property refers to a part of the building/land or whole building that is partitioned into units for individual ownership and where the parts of the building are assigned as common areas. The common areas are the parts of the property for common use by the owner or the occupiers.
The common areas can include components like lifts, lobbies, passages, swimming pools and pieces of equipment. In case the property is not a building then it can include components like landscape area, ponds, pathways and roads. The owners of the units have to contribute to the maintenance of the common areas.
What are the Laws for buying property in the UAE?
Non-UAE nationals can buy property in Abu Dhabi in the form of apartments and floors as per the following laws:
Foreigners are granted ownership deeds of residential property for 99 years and they can dispose of the apartments and villas they buy. Though they cannot own land.
Under the Musataha law foreigners can own residential units for 50 years. This is renewable for the same period by an agreement between the two parties. This law allows the owners to use, construct and alter the property within the specified period.
The Usufruct law allows foreigners to own residential units for 99 years. This law allows the owners to use the property and its facilities but they cannot alter it.
A long lease is given to the foreigners for an initial period not exceeding 25 years.
What are the financing options available in Abu Dhabi?
If you are interested in buying property in Abu Dhabi then there are several financing options available that you can consider. You can consider mortgages or loans from banks.
There is no specific mortgage law in Abu Dhabi and therefore the provision of the UAE Civil Code applies. This code requires the real property to be in existence at the time of the registration of the mortgage. The mortgage has to be registered with the LRD for it to be valid.
In the investment zones for foreigners, the mortgages can be registered with the property developer. This type of mortgage gives the borrower the right under the sale and purchase agreement. It also gives the lender the step-in right in case of a default. The lenders only get contractual rights over the borrower in the underlying property.
To take a mortgage from a bank in Abu Dhabi the bank must be licensed by the UAE central bank. Foreigners can take fixed-rate loans or hedging agreements can protect against the rising interest rates. These two methods are commonly used in real estate financing in Abu Dhabi.
Developer payment plan:
Foreigners can buy property in Abu Dhabi with the developer payment plan. The developers offer various plans like post-handover payment plans, construction-linked plans and more. You should choose a plan that suits your financial situation.
Residential Abu Dhabi market in 2023
According to Knight Frank Abu Dhabi Residential Market Review 2023, the residential values across Abu Dhabi’s freehold areas grew by 1.2% in 2023 and pushed the average price to AED 964 per sq ft. The villa values showed signs of moderation and the best-performing freehold villa market was Al Reef villas where the prices increased by 0.5%.
The apartment prices increased by 0.5% and rose to a little under AED 1030 per sq ft. The apartment on Al Raha beach continued to reach the highest prices of AED 1230 per sq ft. In general, apartment prices are trailing the peak 2014 peak and the villas are fifth cheaper than they were eight years ago.
Abu Dhabi’s apartment market has seen a rise in rent, with average lease prices being higher. After falling during the COVID-19 pandemic, apartment leasing prices are now climbing again.
The location, amenities, and ease of access to facilities all affect the rent in Abu Dhabi. As a whole, the average lease rate and rent in Abu Dhabi’s apartment leasing market have both gone up. The rents for villas are going up after being very low during the pandemic.
To sum up
Abu Dhabi’s real estate market caters to UAE residents, GCC citizens, and global investors. In addition to property laws, mortgages and developer payment plans make residential properties accessible to non-UAE citizens. With continuous growth in 2023, Abu Dhabi is an attractive investment location with evolving opportunities.