Dubai property: New brokerage businesses make full use of 100% foreign ownership rule

Dubai: Buying and selling property isn’t the only lucrative part of the current Dubai and UAE real estate scene – helping set up the deals and getting sizable commissions off it are just as good. Which is why the UAE property continues to attract even more real estate consultancies and property brokers to get into the game.

And these days, operating or creating 100% foreign investor/promoter owned real estate agencies are how it’s done. “Full foreign ownership in the real estate brokerage, investment consultancy and development is the standard set up now,” said Jim Swallow, Commercial Director at the advisory firm Sovereign PPG. “(The only exceptions) are the local ownerships in some of the remaining legacy joint ventures.

“Most of the demand for a new real estate brokerage business set up is to be 100% foreign-owned.”

There could be more of them launching in the near term, even amidst signs that property value gains in Dubai residential space are slowing down in more areas of the city. But that’s still more than enough for serious buyers to keep seeking investment options in Dubai real estate. When you have the buyers ready, brokers need to be at the top of their game.

Not just Dubai, there will likely be more specialist brokerage firms launching in Ras Al Khaimah and Abu Dhabi to make full use of the property boom going on there. The impression in real estate circles is that Ras Al Khaimah is attracting more first-time investors to the UAE, especially from Europe. This opens up possibilities for overseas brokerage firms to follow where those funds are going – and set up property consultancy services in Ras Al Khaimah or for the wider UAE.

It’s only in Dubai that the brokerage business space is saturated, industry sources say.

And the best way to structure new businesses wanting to come in? Have them set up as 100% foreign-owned entities.

It was mid-2021 that the UAE freed up more sectors to come under full foreign promoter ownership when it comes to mainland activities - and that meant no longer a need for a local sponsor. The property services category thus became eligible, and the explosion in new business licenses continues.

“Previously, real estate activities did require a 51% local partner,” said Swallow. “Some companies still do opt to have a local partner, particularly where there is an existing joint venture with a local company or government entity. And if the property is in a specific location that requires UAE ownership for example.”

“Since the 2021 change to the UAE Commercial Companies Law, we are seeing fewer firms opting for local sponsor as it is no longer a requirement. As real estate brokerage can be 100% foreign-owned, most have opted for this share structure.”

More professionals are joining the UAE real estate sector, and that includes fresh graduates wanting a career in this industry. These individuals are not deterred by reports – such as the one from the rating agency Fitch – that forecasts Dubai property value growth will slow down this year and the next.

“Dubai real estate deals just had its best ever month – in April,” said a broker. “If from those levels, there is a slowing down, that’s to be expected. There are still buyers coming to the market, maybe as brokers all of us need to try harder.

“There are still foreign family offices and investment firms setting up UAE operations and possibly wanting to take up positions in local real estate. These are all opportunities.”

The Dubai Land Department lists over 25,800 licensed real estate brokers - and the ‘number appears to be growing as Dubai and the UAE hit new real estate records month-on-month’.

That’s another reason why new graduates are making a beeline into trying to find jobs in local real estate.

“Many firms have since opted for share transfer to 100% foreign ownership if the local partner was a silent partner,” said Swallow. “ Where the local partner was an investor and active in the business, some have opted to be bought out.

“Others have remained as a shareholder, or through a holding company structure, rather than direct personal share ownership to mitigate some of the direct investment risk – particularly in the volatile property sector.”