New legislation restricting foreign investment in real estate has brought a welcome end to speculation over the issue while at the same time clarifying the transaction process. As such it is being heralded as a significant step forward for the sector
In late August Sultan bin Mohammed Al Qasimi authorised a new law on property ownership and registration which stipulates that only UAE nationals and citizens of other member states of the GCC, or their fully-owned corporate bodies, can buy up land and property.
There were reports in late May that the draft property law being considered by the Sharjah Consultative Council would allow the registration of properties bought by other foreign nationals. Real estate firm CB Richard Ellis (CBRE) also said in early August that such a proposal had been mooted as a mechanism to help rejuvenate the market.
While the law does state that exceptions may be granted by Sultan bin Mohammed Al Qasimi in an inheritance transition to a relative “of the first degree” in accordance with a sharia declaration or waiver, these must meet certain requirements.
Despite the restrictions on ownership, the new law’s attempt to clarify rules for registration is likely to result in a far smoother and quicker transaction process. Under the new law, the Department of Real Estate Registration is responsible for all contracts and documents, maintaining real estate records and recording dispositions.
The law also provides for the setting up of an Ownership Verification Committee by the department. The members of the committee will be composed of “efficient UAE nationals with integrity”, said a press statement.
According to Matthew Green, CBRE’s head of research and consultancy in the UAE, the new law is a major step forward that should build confidence in the property sector.
“In terms of property registration, any improvement in the structural and procedural format is obviously seen to be a positive outcome as it will help to improve transparency levels in the market,” Green said in an interview with the Gulf News on September 2. “The clarification on the law will also help to alleviate any uncertainties that existed around the process.”
Though there may be some who will be disappointed in the decision not to further open up the real estate sector, the law has created a more solid framework for property transactions in the emirate, said Ehsan Kharouf, the director of real estate agency Cluttons in Sharjah.
“The creation of the new body – the ownership verification committee – should further improve existing procedures by creating a single point of contact for real estate registrations,” Kharouf told local media in early September.
What disappointment there may be could mainly come from developers hoping to see an uptick in demand for their projects, with sales having fallen back over the past year or so following the global financial crisis and drop in interest in the property market across the region.
The decision comes as the results of a survey suggest the Sharjah property market could face further difficulties with rental charges in nearby Dubai falling back to levels last seen in 2006. At the height of the Dubai market, many chose to move to Sharjah to benefit from its lower prices while commuting to the neighbouring emirate.
The effects of the decline in Dubai rentals could be seen sooner rather than later, according to the chief executive officer of property management company Asteco, Elaine Jones.
“Dubai has become an affordable location to live in, with an increase in the number of affordable properties, good infrastructure and lifestyle,” she told the Gulf News on September 1. “We are witnessing a strong trend of people moving or planning to move from Sharjah to Dubai.”
This could affect demand for properties for leasing to expatriates. However, this could be countered by an increase in demand from GCC nationals, now that the law of the land has clarified and set in stone the rules for property ownership.