Land Ownership in Dubai: A Comparative Analysis of Freehold vs. Leasehold Options

With multiple upcoming developments throughout the city, Dubai’s real estate market is one of the most exciting. The real estate transactions carried out during 2023 increased by 37% compared to the previous year. Apart from that, residential property prices surged by approximately 7% year over year. The rental sector has been flourishing as well, with an average of 8% to 10%.

In 2024, Dubai real estate has no plans on slowing down, with approximately 30,000 units set to hit the market. Amidst all of this, having a clear understanding of freehold and leasehold land ownership options in Dubai will be helpful.

What is a Freehold Property?

Freehold property allows ownership of both the land and the property to the owner. Such properties do not have a lease period; hence, they can be sold without any restrictions or passed down through generations. Dubai freehold properties also have their own unique advantages and disadvantages, the knowledge of which can help you make informed choices about your real estate investment.

Pros:

• As an owner, you have the complete right to sell or rent out the property as deemed fit.

• Such properties can be inherited without any intermediary steps.

• If the property value exceeds AED 1 million, you and your family are eligible to obtain a UAE residence visa.

• They are a secure and long-term investment with better capital appreciation.

Cons:

• Freehold properties have a higher upfront cost, which makes them less accessible for those with budget restrictions.

• All the maintenance costs need to be taken care of by the owner.

• Since freehold properties are not offered in all areas of Dubai, the limited availability can cause a compromise on location.

What are Leasehold Properties?

Such properties are acquired on a lease agreement with the owner of the property. The agreement has a fixed duration, which must be 99 years or less. The buyer who purchases leasehold properties does not have any ownership over the land it has been built upon.

Similar to freehold properties, leasehold properties too have their own unique pros and cons. These aspects are vital to understand before proceeding with any investment decisions.

Pros:

• Leasehold properties are lower in initial cost and are generally more affordable. This makes them a well-sought-after option for budget-conscious buyers.

• Since the maintenance is shared, it reduces the cost burden on the residents significantly.

• Leasehold properties are seen as more secured as they are often under government regulations. This provides them with an increased sense of security.

• They are also hailed for their lucrative investment opportunities. Leasehold properties offer some of the most attractive rental yields, which puts them in the spotlight of investors who are looking for rental income in Dubai.

• These properties are available on various lease periods, which allows you to choose the right amount of time according to their needs.

Cons:

• If you want to undertake any significant renovations and modifications, you must obtain permission to do so from the landowner. This limited control over the property might push away certain buyers.

• Once the lease period expires, the lease renewal cost needs to be borne by the residents. The significance of these costs depends on the duration of the contract and the location of the property.

• Leasehold properties are subject to their agreements. This means they cannot provide the same level of long-term legacy as freehold properties.

• As most maintenance costs are shared, this can lead to disputes, affecting the overall living experience of the residents.

• Leasehold properties also do not permit subletting.

While choosing between purchasing a freehold or a leasehold property in Dubai, you must proceed with careful consideration of your investment goals, financial health, and long-term goals. If you are seeking long-term stability and investment in Dubai, along with significant capital appreciation, freehold properties are the most suitable option. Explore some of Meraas’ freehold properties across top neighbourhoods in Dubai.