Foreigners now allowed to invest in leasehold property in specified Sharjah developments

With leasehold ownership regulations for foreign nationals in place and property more competitively priced than in Dubai, Sharjah is set to succeed in attracting significant international investors to its real estate sector. Until the recent global financial crisis, Sharjah’s rules prevented anyone who was not an UAE national from owning real estate in the emirate. These restrictions were then relaxed to allow GCC nationals to buy leaseholds.

In 2014, for the first time, Sharjah passed a law enabling expatriates from any country in the world to buy property in the emirate on a leaseholder basis, as long as they hold a UAE residency visa. Leases will last for 100 years, offering lifetime ownership rights. At the same time, GCC nationals and Arab residents are now able to buy land on a freehold basis, in order to then build and develop their own properties.

Strategic Roll-Out

According to the new law, foreigners are restricted to buying in specified developments, which so far have been the new communities on the edge of the city centre area. “Only now in certain locations approved by the government can you buy freehold as an Arab or leasehold as an expat. So it is not quite fully open yet. It is also questionable if they would allow a 100-year lease on an apartment since they don’t consider that the building lifespan would be more than 50 years,” said Suzanne Eveleigh, property management director at international property agency Cluttons, told OBG.

Among the first developments to announce that non-GCC residents of the UAE can buy property on a leaseholder basis are Al Rayyan, a mixed-use development near the border with Dubai, which is being created by JMS Property Development & Management, and Tilal City, a major mixed-use development, which is also offering plots of land to buy or lease for UAE residents and GCC nationals to then develop. “There is a huge demand for plots, Khalifa Al Shaibani, director-general of Tilal Properties, told OBG. “More than 70% of the ones that have come available have already been sold.”

Resolving Issues

The success of projects like Tilal City is likely to determine whether similar schemes are brought forward in Sharjah. With such a new law many questions remain, and some investors are likely to hesitate or wait to see how those investing early get along with the process. The 100-year leases, only apply to select properties, making it hard to compete with Ajman that has freehold and is right next door. Further challenges are that properties under lease are difficult to sell, and there also a lack of clarity with respect to the regulatory framework. According to Tilal Properties’ Al Shaibani, “in order to protect against market speculation, if a foreign investor wants to sell their plot, 40% of the land value must be paid by the investor. This will also prevent property flipping.”

Interested Parties

While the change in law is likely to bring in new residents, who now see Sharjah as a place they can buy property, industry insiders feel that for the near future it will be primarily those already living in Sharjah who will take advantage of the change in regulations. “We think the biggest demand will come from Arab and Asian Muslims living here who want their families to live in a stable and safe environment,” Hamad Salem Al Mazrooa, director-general of the Sharjah Real Estate Registration Department, told The National in November 2014, adding, “The only restriction is that they must have a residence visa at the time of purchase. If, for some reason, after the purchase their residence visa expires, they are free to hold the property, lease or sell it as they wish.”

These latest changes point to a more welcoming approach for Sharjah. However, the emirate is still comparatively more restricted for foreigners than neighbouring Dubai, where freeholds for non-UAE nationals have been available since 2006. Still, with foreign investors finally able to access the Sharjah market, increased foreign interest will likely follow.

 

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The Report: Sharjah 2017

Construction & Real Estate chapter from The Report: Sharjah 2017

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