Abu Dhabi is looking to establish a new set of real estate regulations in an effort to clarify its legal framework for investment and attract foreign capital. The new regulations will most likely be modelled from the legal framework of neighbouring Dubai and will involve the development of a real estate regulatory body, title registry and multi-owned building regulations.
During a recent seminar on property law, Ahmad Mohammad Shareef, undersecretary of the Department of Municipal Affairs (DMA), said, "Abu Dhabi is currently witnessing a construction boom that is predicted to continue into the next 15 years [...] The success of these mixed-use projects, however, is dependent on having the right regulatory framework that could provide the legal protection and clarity that property owners and investors require."
Reform in Abu Dhabi's real estate sector began with the introduction of two laws in 2005. Law No 3 established the Land Department, which serves to register property rights and issue the corresponding documentation such as title deeds and certificates. Law No 19 outlines ownership rights of UAE and GCC nationals in Abu Dhabi. This law also entitles foreign nationals to a usufruct right (leasehold) for up to 99 years within designated 'investment zones'; effectively allowing them to own real estate units but not the land they are built upon.
In spite of these laws, analysts say there is still more work to do regarding the real estate regulations in the emirate. They suggest further refinement of the code to facilitate foreign investment and boost consumer confidence.
The DMA is working in collaboration with the United Arab Emirates (UAE) based legal firm Al Tamimi & Company to draft documents explaining the laws pertaining to the maintenance and operation of multi-owned buildings. A new Strata law, designed to better define ownership in multi-owned buildings such as apartment complexes, will be developed to outline the obligations and rights of developers and owners alike. Neighbouring Dubai is expected to implement this type of regulation shortly; however, there has been some delay for this much needed reform.
Speakers at the seminar stressed the need to set up a land registration system similar to the Dubai land department's computerised model. Local lawyers and property specialists also expect the government to establish a body similar to the Real Estate Regulatory Agency in Dubai to regulate both real estate brokers and property developers.
Within the UAE, Dubai has historically taken the lead in property regulation. The emirate legalised property sales between locals in 1997 and to foreigners (with certain restrictions) in 2002. Prior to that time, transferring ownership of land required official approval. However, if Abu Dhabi issues a Strata law before Dubai, it will have the opportunity to acquire a leadership position in UAE real estate law. Although additional reform is required, analysts believe investors should be encouraged by the developments in the local property market.
Real estate sales started off slowly in the beginning of 2007 but have picked up in the second half of the year. According to Walid Khalfallah and Majed Azza, real estate analysts for HSBC in Dubai, the local real estate market "remains extremely tight, with stronger-than-expected growth in rents (22%) and prices (18%)." Although some buyers remain hesitant to invest because of gaps in legislation regarding property ownership, the proposed regulations should have a positive impact on the market by attracting more foreign investors.
Abu Dhabi is trying to strike a clear balance between developing an investor-friendly property market and maintaining local ownership. The government is continuing to work alongside the private sector to create regulations beneficial to both parties and ensure a healthy real estate market into the future.