Afridi & Angell inBrief
On 22 July 2022 Dubai Decree No. 22/2022 (the Decree) came into force with the purpose of encouraging further investment in the Dubai real estate market via the provision of various incentives and privileges aimed towards real estate investment funds.
In this inBrief, we look at the various privileges that will now be afforded to property investment funds in order to attract further investment into Dubai’s already booming real estate market, as well as giving a brief overview of other key articles contained in the Dubai Decree.
Traditionally, property investment funds were afforded the same property rights as those that were granted to any other investment entity or foreign investor.
However, property investment funds were not commonly utilised as an investment vehicle in Dubai as any change in the fund’s shareholding attracted the standard Dubai Land Department transfer fee. Due to the everchanging nature of many property investment fund’s shareholding this was seen by investors as an onerous burden.
Further, as property investment funds are permitted to be established only under the Abu Dhabi Global Market’s (ADGM) REIT framework (the ADGM Fund Rules), the Dubai International Financial Centre’s Investment Trust Law framework (the DIFC Investment Trust and REITS Rules Instrument), and the Emirates Securities and Commodities Authority’s framework (Administrative Decision 6/R.T of 2019 Concerning Real Estate Investment Fund Controls), property investment funds were not seen as a cost-effective investment method due to the various restrictive regulations that applied to them.
However, now a registered property investment fund will be able to avail of the following privileges:
Other Key Articles
Article 4: Establishment of the Register
The Dubai Land Department shall establish a register for the purposes of registration of property investment funds that meet the required criteria outlined below.
Article 5: Conditions and Procedures of Registration in the Register
In order for a property investment fund to be added to the register and thereby avail of the privileges set out above, the following criteria must be met:
Article 6: Writing off from the Register
A property investment fund can be removed from the register upon the occurrence of a number of circumstances:
Article 7: Duration of entitlement to the privileges
A registered property investment fund is entitled to avail of the new privileges from its date of registration in the above-mentioned register until the date it is removed from same.
Article 9: Committee of Property Investment Funds
The responsibility for the identification of areas where ownership is not permitted to be held by UAE non-nationals and where property investment funds may now have the right of absolute ownership or usufruct or a long-term lease (the term of which does not exceed 99 years) will fall to the newly established Committee of Property Investment Funds (the Committee). In determining which such areas are suitable for investment and therefore available to property investment funds, the Committee shall consider:
It should also be noted that property investment funds are required to obtain preliminary approval from the Committee in advance of disposing of its interest in any property acquired in the areas identified by the Committee.
Article 12: Privileges of property investment funds operating in the DIFC
Whilst this Decree applies equally to all property investment funds licensed to operate in Dubai (including those licensed in free zones or special development zones), the extent of the privileges that shall apply to those licensed in the DIFC will be at the discretion of the chairman of the DIFC.
The two key changes ushered in by this Decree (the permitting of ownership of selected real estate within areas where it is typically prohibited for non-UAE nationals to own property and the removal of the Dubai Land Department registration fee upon a change of a property investment fund’s shareholding) are a significant development and an indication that property investment funds may now begin to have a greater impact on Dubai’s real estate market.
We anticipate that the changes that have now been introduced will relieve a number of burdens that would generally apply to property investment funds and encourage investors to re-evaluate property investment funds as a viable investment vehicle.
If you require more detailed information, please do not hesitate to contact us. ■Download inBrief as PDF