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Difference between Freehold and Free Zone Areas in Dubai

Saturday, December 15, 2018

The Dubai real estate market is seeing massive growth with many new developments coming up. Thus, you can come across many property investment opportunities in this emirate. In case you are a first-time investor in this property market, you must be aware of the difference between a freehold property and free zone areas in Dubai. You must know the legalities that are associated with the free zone and freehold areas in Dubai. This knowledge will help you to decide as to where you can invest or set up your business to get the best possible results.

What are Dubai free zones?

Dubai consists of over 30 free zone areas. Free zone areas that are also known as free trade zones in Dubai have designated business zones. These areas are pretty much used for business. These don’t have any residential properties. The idea of setting up a business in a free trade zone is ideal for foreign companies. This is a good option for business owners who have a good portion of their business outside the UAE but are very much looking to use the UAE for regional manufacturing or as a distribution base.

Free trade zones in this emirate have been mainly crafted to encourage foreign investment in Dubai. This is because its tax exemption enables for a gainful business environment for the registered companies in the Dubai free zone. The main thing to know is that business owners who set up their business in a free trade zone enjoy 100% ownership of the business.

In the current scenario, Dubai has more than 30 free zones that are functional. The top ones are the Dubai Multi Commodities Centre (DMCC) and Jebel Ali Free Zone (JAFZA). The latter is also one of the oldest free trade zones in Dubai.

What are Dubai freehold properties?

Dubai Marina is the most common freehold area in Dubai. In these very areas, non-GCC nationals can own properties. You must know that buying a property in a freehold area enables a buyer ownership of the land and the housing unit on the property. When you have purchased any freehold property, you have the freedom to sell, lease or live on the property. It is not required of the buyer of a freehold property to be a resident of the UAE.

Foreign nationals can purchase land in the freehold areas in Dubai.

In the year of 2002, the command to buy property in Dubai on a freehold basis was passed by His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President & Prime Minister of the UAE and Ruler of Dubai.  At the time when you purchase a property in any of the freehold areas in Dubai, you have registered the buyer’s name with the Dubai Land Department (DLD) as the ‘landowner’. This way you are granted the title deed for the property. In case the owner passes away, an heir can inherit the freehold property. Thus, the property pretty much stays in the same family.

In the current scenario, Dubai has 23 neighborhoods that have been designated as freehold. The most popular freehold areas in Dubai are Dubai Marina, Downtown Dubai and Jumeirah Village Circle (JVC).

If an investor wants to make revenue, you must know that the owner has complete control over the property. The owner can lease, resell and modify the property. In usual, freehold areas offer many investment opportunities.

Which is a better option for you: freehold or free zone?

You need to consider a good deal of factors while deciding to choose between the two. Firstly, you need to be sure of the purpose of your investment or the amount of control you want as a business owner. In case you were looking to set up a business in Dubai, in a freehold area you were required to partner with a UAE national. In such a case, the UAE national would own a maximum of 51% of the shares while you hold the remaining 49%. However, things have changed lately. Certain new company laws have been announced in the UAE. Presently, foreign investors can own 100% of the companies outside of the free zones in the UAE.

Until the new law becomes effective, it is important to have 100% of the ownership of any business in Dubai. Foreign investors can set up businesses in Dubai’s free zones. However, it pretty much limits the likelihood of growth. This is mainly because companies in Dubai free zone are allowed to operate within the free zone areas in Dubai. In case you wish to own property in Dubai to live in or sell, investing in Dubai’s freehold areas is just what you need to do. Keep in mind that off-plan investments can be a smart investment opportunity. This is mainly because the prices tend to be lower. Thus, it offers a greater return on investment.

In case you are looking to buy property in Dubai, you must check out the Q1 real estate market report for Dubai. This will help you to find out about the trending areas in the Dubai property market.

What are the pros of going for free-zone areas?

Usually, Free zone areas are more preferred by foreign companies that wish to operate in UAE, maintaining 100% of ownership.

  • No requirement of finding a local partner.
  • Allowing investors to own 100% of the company.
  • A good bunch of considerations and more liberty to operate.
  • Have the freedom to do more than one activity.
  • Tax Exemption.

What are the cons of going for free-zone areas?

In usual, free zone companies are allowed to operate within the free zone areas in Dubai. This reduces their opportunities for expansion.

Conclusion

In case you’re looking to invest in properties in order to become a homeowner, a landlord, or to resell the property while it is profitable, you must invest in a freehold area. However, if you’re looking to invest in properties in order to start a business and wish to be the sole owner of the company, you must invest in a free zone area.

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