Abu Dhabi has experienced remarkable growth in recent years, solidifying its position as a leading financial, cultural, and entertainment hub in the region. With a steadily rising number of newcomers – attracted by the city’s numerous lifestyle and economic advantages – many are now asking whether foreigners can purchase property in the capital, and if so, what the process entails. In this guide, we’ll outline everything you need to know about buying property in Abu Dhabi as a foreigner.
Before we begin, it is important to understand that it is possible for foreigners to own property in the city, but only certain types (of property). It all comes down to Law No.19 of 2005, which concerns the regulation of the real estate sector in Abu Dhabi. This specific decree affords foreigners the right to own property in the form of floors and apartments only, not land. There are four main systems through which an interested party can acquire a qualifying property.
Ownership
Similar to the Dubai leasehold model, foreigners can own properties in Abu Dhabi, but only under a 99-year leasehold title. This allows ownership of residential units such as villas or apartments, and also comes with the added benefit of being able to sell the property on, despite not owning the land the bricks and mortar sit on. “Ownership” is most advantageous for buyers who are looking for a long-term residence or those looking to invest.
This model is basically the Abu Dhabi version of a freehold property. It provides the buyer with a full ownership deed, so you might hear this being referred to as freehold in the Abu Dhabi market. It is important to understand that it is not the same as what you might understand as freehold in your own country. In many Western countries, for example, freehold means you own the property and the land. That is not the case with freehold properties in the UAE capital.
Musataha
A Musataha agreement is made between an investor and the owner of the land, giving the investor the right to develop the land over a certain period of time, usually between 10 and 50 years. The investor, referred to as the ‘Musataha’, is able to develop buildings, invest in property, mortgage and even lease the land which belongs to the owner. However, a share of the profits must be paid to the land owner, as per the Musataha contract. Upon completion of the 50-year lease, the Musataha can be renewed once.
This form of ownership was introduced into the UAE to encourage investors to embark upon real estate projects. It comes with a range of benefits, including more rights and flexibility, and is particularly useful for those wishing to undertake sizeable development projects. Furthermore, Musataha contracts allow owners to potentially mortgage the land and receive a loan from the bank.
Calculating the Musataha value is done by multiplying the yearly rent by the number of years in the agreement. Prices vary depending on where in Abu Dhabi the property is located.
Usufruct
This option presents buyers with the right to use and benefit from their property for a period of 99 years. However, where the Usufruct differs is in the fact that the user cannot alter or modify the structure of the building.
While the Usufruct can be a handy option in some circumstances, the fact that no modifications can be made makes it an implausible option for a lot of potential buyers. Where this option can make sense is for those who plan on owning the property long term but do not need (or wish) to make any adjustments. As such, Usufruct is a good option for those who are specifically looking for an apartment to buy in Abu Dhabi.
Long-Term Lease
This option affords users the right to occupy and use a property for a minimum of 25 years. The long-term lease option is similar to a long lease in other countries, and allows exclusive use of the property for the contracted term. It also allows potential buyers the option to sublet, dependent upon the specific terms of the contract.
While not as long as the other options, the long-term lease often includes the right to renew or renegotiate terms upon completion of the contracted period. This can be attractive to expats or business owners who are seeking long-term stability, but do not want (or need) ownership responsibilities.
Additional Considerations
Covering a range of needs, all of these options come with certain pros and cons. For those wishing to buy in Abu Dhabi, there are a few further considerations to fully understand before beginning the process.
Similar to Dubai, expats can only buy property in certain designated locales around the city. Areas such as Yas Island, Al Raha Beach and Saadiyat Island all afford foreigners the right to buy in Abu Dhabi, while property outside of these zones is not available for expat ownership.
Additionally, Ownership, Musataha, and Usufruct are all legally recognised property options and can all be registered with the relevant authorities. These property rights also come with inheritance rights. Should the situation arise, property can be passed to heirs in accordance with the laws in their home countries, thanks to a new law. Of course, a will is needed, but the testator is eligible to leave the property to whomever they please.
Finally, it is important to consider employing a legal advisor, someone who is in tune with the ins and outs of each of the property systems we have discussed. These experts can clearly guide you through one of the most important decisions of your life.
Buying property in Abu Dhabi involves navigating a unique set of rules and options, so it’s important to understand the details before committing to a particular system. Thankfully, this guide is on hand to walk you through everything you need to know.
