Partial title deeds law opens up investor pools for Dubai

Dubai: Dubai’s real estate market has already welcomed cash-ready investors and end users. Now, it is targeting a relatively new set of buyers — those wanting to pool funds and share ownership in a property.

So, whether the investor puts in a few thousands of dirhams or a million or more, his share in that property will get duly recognised … officially. While this helps with the ease of buying, partial deeds can also help on the selling. The individual could dispose off his share and not be bound whether other investors agree or not.

This is essentially what having “partial” title deeds will allow, whereby each investor in that property will have their rights recognised by the Dubai Land Department. Dubai’s authorities are also looking at the bigger picture with this option, at a time when thousands of homes are being delivered.

The thinking is that by extending official recognition through title deeds, more investors will come together to pick up residential units. There have been one or two efforts to “crowdfund” investments in local real estate, with minimum entry as low as Dh5,000. Such online platforms should now find it easier to convince potential investors that their investments will be duly registered.

Right now, the Land Department says these partial deeds will only be extended to hotel/serviced apartments. But industry sources say that it could only be a matter of time before the scope is widened — “We believe there is a review underway to allow it for other property forms,” said Sameer Lakhani, Managing Director at Global Capital Partners. “Serviced and hotel apartments are already popular as investments, and the Airbnb effect will make them more popular for short-term rentals. This is what a pool of buyers could cash in on.”

At the official announcement, a senior Land Department official did indicate that partial deeds could eventually be opened up to other property types. “A unified system means equal ownership of properties between two to four investors, and will initially be available for hotel facilities,” said Majid Saqr Al Merri, CEO of the Registration and Real Estate Services. “As for registration legislation, we will employ the existing ones.”

Between 2013 to 2017, there were quite a few projects launched in Dubai that offered serviced apartments. Emaar had its Address developments, Damac launched the “Maison” line, and Omniyat went big at its Dh1 billion Langham Place project in Downtown. Nakheel’s got a twin-tower project in its project pipeline — the Palm360 — where one of the buildings will feature super-luxury serviced apartments managed by Raffles.

These aren’t the only ones, as developers target Saudi and other Gulf investors wanting to have a base here. They have also released projects at lower price points, of under Dh1 million. Now, with partial title deeds on offer, these developers will be able to pull in a different sort of buyer … or buyers.

Partial title deeds — who are they for?

Clearly, for the wealthy picking up property for investment purposes will have no need for partial deeds. Even end users will prefer tapping banks for mortgages or sign up for the post-handover payment plans developers have on offer. But between these two buyer profiles lie untapped opportunities.

“In other real estate investment destinations, standard practice instead of partial deeds is for the pool of buyers who come together to set up a company structure, which then acquires the property under its name with the individuals as shareholders of the firm in agreed proportions,” said Taimur Khan, Associate Partner at Knight Frank, the consultancy. “Dubai’s testing relatively unchartered waters with partial deeds.

“For international investors who have to decide between a London, New York or Dubai property, partial ownership may not have many advantages. However, if the plan is to attract investments from broader segments, this may induce demand … albeit it’s likely to be limited.”

Investors benefit from lower transfer fee payments

On one point, partial deeds offer a distinct advantage to the cost-conscious investor. Earlier, if someone wanted to sell off his stake, he would have had to pay the 4 per cent transfer fee on the entire value of the property. Now, under the partial deed structure, “The transfer fee would only be levied on the fraction of the property being sold,” said Lakhani. “This in itself represents a major incentive for property buying.”