Dubai: Overseas investors wanting to buy property in Dubai through ‘offshore’ companies are suddenly facing a problem.
“Banks are not too keen to open bank accounts under these newly set up offshore companies,” said Kundan Choudhary, CEO of Stones International Group, a business and real estate consultancy. “Or the process of opening an account is taking too long than was the case earlier.”
Setting up offshore companies has been a tried and tested route for foreign investors and funds to acquire real estate in the country. These companies would be registered at free zones and all of the investments – and repatriation of profits – will be routed through the registered bank accounts.
“All transactions and property registrations require bank accounts – delays are hurting inward fund flow into the property market,’ said Choudhary.
Banking industry sources say that the delays are happening because of the increased regulatory requirements these days, including that related to the Ultimate Beneficial Owner (UBO) rules. What the UBO requires is complete transparency related to the shareholders in all businesses licensed to operate in the country, onshore and on the mainland. (In recent weeks, many businesses in Dubai have received stiff fines for not registering all their shareholder details before the cut-off date. June 15 was the deadline, with the authorities offering a grace period until July 7.)
Other property market sources confirm that banks have tightened up the processes for offshore businesses wanting to register or open an account. In the past, a bank account could be set up “within hours” of registering an offshore company, these sources add.
Recent weeks have seen increased interest from overseas investors, including those from Israel, searching for property buys in Dubai. The cancellation of flight services due to COVID-19 related issues had been one factor delaying higher sales to foreign buyers.
“A lot of my overseas clients are facing this problem with bank accounts because their preference is to go through the offshore company way,” said Choudhary. “It was immaterial whether the offshore funding entity was registered at a local free zone, in Seychelles or BVI (British Virgin islands).
“These investors want their property deals to be registered under their company name and not in their own. But that’s because it helps them better deal the tax requirements in their own countries.”
Bonanza for mainland
With delays on the offshore side of things, overseas property investors are getting into the ‘mainland’. After the UAE allowed 100 per cent ownership across business lines, these new investors are getting their companies registered with the Department of Economic Development.
“The mainland is benefiting because there are no hassles on opening a bank account for a newly registered company with DED,” said Choudhary. “Even with a new offshore company that also has a mainland license, opening a bank account is not a problem.
“But a sole offshore license – now, that’s a different issue.”
