New legislation makes real estate even more attractive to investors.
Emerging from its chrysalis, Abu Dhabi shakes off its previous languor and charges into the realty market.
If the rapidly changing skyline of Abu Dhabi is anything to go by, then in the next few years the UAE capital is likely to transform itself into a global metropolis. According to Abu Dhabi's major urban development initiative, Plan Abu Dhabi 2030, the emirate will witness a prolific construction boom in the next few years. The long-term planning strategy, which will create a well-planned and sustainable metropolis, will help garner investor confidence and boost Abu Dhabi's image as a global destination of the future.
Reports published in the second quarter of 2007 by the research team of CB Richard Ellis (CBRE) say that during the previous nine months property projects worth more than Dh100 billion were announced throughout the emirate. The CBRE report also says that one of the key factors likely to determine the future demand and supply characteristics of the Abu Dhabi property market is the emergence of legislation governing the emirate's free zones and investment zones. The law will increase the number of properties available in the market, a large proportion of which will be released to the rental sector by private landlords and investors.
Benefits for everyone
According to the most recent property law in Abu Dhabi, signed by His Highness Shaikh Khalifa Bin Zayed Al Nahyan on August 10, 2005, UAE nationals have the right to own freehold land and buildings anywhere within Abu Dhabi, GCC nationals have the right to own freehold land and buildings within the designated investment zones, and other expatriates have the right to own only freehold buildings (and not land) within the designated investment zones.
When it comes to non-UAE and GCC nationals the law states that they may also acquire a right of usufruct (the right to use property belonging to another person) for a period of 99 years and a right of musataha (the right to build and develop on the land belonging to another person) for a period of 50 years, both being renewable under mutual consent.
"It is important to remember that while an investor may have a specific right to own a freehold title, developers are under no obligation to provide this, and as such have the option to sell on the basis of freehold or leasehold title. The terms and conditions of any sale are determined by the developer and may vary from project to project. Currently expatriates buying outside the designated 'investment zones', in areas which have been given executive decree to sell to all nationalities (for instance, the residential communities in Al Reef and Al Shahama), are doing so on the basis of a 99 or a 198-year lease," says Guy Sadler, Head of Marketing of Profile Group Properties.
Why Abu Dhabi
Sami Maroun, Director of Plus Properties, says that most of the big developers such as Manazel, Aldar and Hydra offer leasehold properties, renewable after 99 years. "One large developer on Reem Island has started offering freehold opportunities, and the others who are still on leasehold bases are set to switch to complete freehold within the next few months," says Maroun.
London-based businessman Sunil Pathak, who has bought a number of apartments on Reem Island, says, "We decided to buy property in Abu Dhabi because of the good investment climate, and also because we found this place a lot nicer culturally. While buying property we relied a lot on our intuition, but also trusted master developers Sorouh and Tamouh. We are told that these apartments are freehold, but we have yet to receive a formal documentation of the same."
Like Pathak, Dubai-based businessman Jay Leitner, who has bought apartments on the Al Reem Island last year, says, "Abu Dhabi offers good investment opportunities and the financial power to back large scale developments as well. Initially I was not very clear about the property laws of the emirate, but I studied the contracts very carefully before investing. I've been notified that my apartments are freehold, and I should receive possession by the end of 2009."
The CBRE study says that the Abu Dhabi Land Department has added Sadiyat Island, Lulu Island and the High Corporation for Specialised Economic Zones to a list of investment zones currently including Al Reem Island and Al Raha Beach.
"The key factors to consider in any investment are location of the project, quality of the design and the finishing, timing of the project, quality of the developer, contract specifics (is it freehold or leasehold) and return on investment," says Sadler.
According to Sadler Abu Dhabi is setting up its own Land Registry Authority which will protect the ownership right of investors once their title is recorded with them.
"Dubai has recently moved to a system of escrow accounts to protect investor money until a project is handed over, and Abu Dhabi is moving towards similar protection to encourage greater foreign investment," he says.
"The Abu Dhabi market will show signs of greater activity once new supply enters the market towards the end of 2009. Demand for commercial offices and housing units is very strong in the leasing market, despite surging rental rates and high levels of inflation. Abu Dhabi is characterised by a shortage of units throughout all property sectors, therefore prices may further increase until a substantial amount of supply enters the market in 2009," said Iris Dinu, Associate Director of CBRE.
What the future holds
According to Maroun, "Current and future property owners in Abu Dhabi will certainly be legally protected, and their investments assured. Ownership laws are carefully designed to ensure long term and continuity. Once the decision is taken to 'open up' a certain area for freehold ownership, all of its legal aspects are resolved, and expatriates can rest assure that their investments are sound and protected.
It is expected that Abu Dhabi's tremendous growth due to its great political stability and oil wealth, diversification of its industry and services, and the wise decisions of its rulers will certainly open the ownership laws by stages, creating a booming investment opportunity in the emirate."