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Dubai is awash with new projects such as hospitals, bridges, schools, record breaking Ferris wheels and superhero theme parks. What all these projects, integral to Dubai's delivery of its Expo 2020 vision, have in common is the need for land.
Looking at the number of projects under way, one takes the availability of buildable area for granted. However, this view belies the tight control the local administration retains over its much sought-after land bank.
The Dubai Government has traditionally looked at the allocation of real estate in the city as a matter of national importance. It has allotted space to UAE nationals for several purposes, usually for homes, but also for educational, charitable and commercial use, at no cost. Such land is not considered true freehold to be bought and sold; it is granted by the ruler to benefit the local or wider community. Such areas are legally known as Granted Land or Gifted Land.
This type of land is subject to different rules from the ones that govern private freehold real estate. Under Dubai law, a title holder of Granted Land may not deal with the asset (by way of sale, mortgage, grant, swap or investment) without special permission from the ruler of the emirate (other than to get a mortgage over residential slots for construction purposes). Any act that contravenes this prohibition is deemed null and void.
In the case of commercial or industrial land, however, the law provides a statutory process to alter the classification of the area and convert the nature of the title to an unrestricted one. A legislation from the 2010 Decree (i.e. Decree No.4 of 2010 — Ownership of Granted Industrial and Commercial Lands) governs such conversion. This law allows beneficiaries of Granted Land to convert their holdings into private freehold with all the benefits of the title for commercial dealings. This update has unlocked significant investment potential in some of Dubai's best locations and generated sales of industrial lands. In many cases, these properties were held by individual owners and, with single ownership asset dealings being more attractive to investors, the decree opened up real estate sales activity in previously restricted areas.
The procedure, according to the decree, is simple—the beneficiary must apply to the Dubai Land Department and, if the petition is accepted, pay a fee equivalent to 30 per cent of the land's market value as designated by the department, to convert it into a freehold property.
The law also provides for third-party occupiers of Granted Land (i.e. someone who has taken the title from a beneficiary). They can apply for a freehold title by paying a fee equivalent to 50 per cent of its market value as designated by the Land Department.
So what should investors and owners be aware of when dealing with such land?
Before investing in a project, a person should review the title deed of the development land. This can be done at the Dubai Land Department with the owner in attendance or by reviewing a recent copy of the title deed, which is provided by the owner. This will reveal if the land is Granted Land.
If it comes to light that the land constructed on is Granted Land, owners should consider the commercial benefits of converting its status to freehold.
Click on Legal Measures and its aim to protect buyers in Dubai
Source: Andrew Thomson, Special to Property Weekly
The writer is an Associate Partner at Clyde and Co.