New Privileges for Property Funds in Dubai – What You Need to Know

Property Investment Funds in the Emirate of Dubai (the “New Decree”).

Scope of application

The New Decree applies in respect of:

• all property investment funds which are licensed and regulated in the Emirate of Dubai, including special development zones and free zones (DIFC included); and
• all properties which are located in the Emirate of Dubai, including special development zones and free zones, but excluding properties which are located within the boundaries of the DIFC.

Key provisions of the New Decree

1. The New Decree establishes a ‘Property Funds Register’ (the “Register”) for the purposes of registering the details of all property funds that are qualified to benefit from the privileges that are set out in the New Decree.
2. For a property investment fund to be admitted in the Register, it must satisfy several conditions which include such fund having a net asset value of not less than AED 180 million upon the submittal of the application to register, and the payment of a fee of AED 10,000 to the Dubai Land Department in connection with such registration.
3. Insofar as the property funds are registered in the Register, they will have the right to acquire properties which are located in those areas in the Emirate of Dubai which are designated for foreign ownership (the “Designated Areas”). Additionally, registered property funds will be permitted to acquire freehold rights, usufruct rights and long-term lease rights (not exceeding 99 years) in specific non-Designated Areas which will be determined by a new committee that is established pursuant to the New Decree.
4. Property funds that are registered in the Register will be subject to a specific treatment in respect of land transfer fees. For example, in connection with properties acquired by a registered property fund, the Dubai Land Department will levy a land transfer fee of 2% calculated based on the market value of the property and which will be payable in equal proportions by the buying fund and the seller unless otherwise agreed.
5. The New Decree allows the Governor of the DIFC to set out other privileges in favour of property funds operating within the boundaries of the DIFC.
6. The New Decree allows the founders of a property fund to contribute properties in-kind subject to the payment of a lump sum fee of AED 50,000 in connection with the transfer of ownership from the founders to the property fund.
7. For property valuation purposes, the Dubai Land Department will designate a valuator recognized by the Real Estate Regulatory Agency and who shall conduct such valuation in accordance with the principles set out by the Dubai Land Department.

Effectiveness

The New Decree is effective from the date of its publication in the official gazette which is 22 July 2022.

How can we help?

If you would like to know more about the new decree and its implications for you, please contact our team via email:  property2@tamimi.com