Freehold vs Long-Term Lease in Dubai: Key Differences

In a dynamic real estate market like Dubai, you are faced with multiple ownership options, but the most important question remains:

Do I buy property under the “Freehold” system, or choose a “Long-Term Lease” contract? The difference between them is not only in duration, but also in rights, management, and control, and even return on investment. In the article below, you can learn about the differences.

Difference between Freehold and Leasehold-to-Ownership Contracts in Terms of Concept

You can learn about the difference between Freehold and long-term lease-to-ownership contracts in terms of concept as follows:

• Freehold (Freehold): Absolute and perpetual ownership
  
  It is a system of full ownership of the property and its land, for life, with the right to sell, rent, or inherit it. This type is available to foreigners in specific areas known as “Freehold Areas” such as Dubai Marina, Downtown Dubai, Palm Jumeirah, and Business Bay.
  
  
• Ownership through long-term lease-to-ownership contracts
  
  It is a system of limited ownership for foreigners that includes ownership of residential units without land for approximately 99 years, granting them full disposal rights of the apartments and villas they purchase without the land.

Ownership through long-term lease contracts includes two main types according to UAE law, which are:

• Usufruct: grants use of an existing property for up to 99 years without the right to make fundamental changes to it. Suitable for those who wish to exploit an existing property for a long period without owning it.
  
• Musataha: grants the right to build new projects on land owned by others for 50 years renewable, with ownership of the constructed buildings. Ideal for developers who wish to develop land without purchasing it.

Difference between Freehold and Leasehold-to-Ownership in Terms of Advantages

Each type of ownership in Dubai, whether Freehold or Leasehold-to-Ownership, grants many advantages to investors, as clarified below:

Advantages of Freehold

• Full ownership of the property and land with freedom to modify and renovate.
• The property is automatically inherited by the family upon the owner’s death.
• Full freedom in sale or rental without additional approvals.
• Grants the owner and their family a renewable residence permit in the UAE.

Advantages of Leasehold-to-Ownership

• Wider options in locations and prices for non-citizen residents.
• Possibility to renew the contract upon expiration to avoid relocation.
• Structural maintenance is the responsibility of the original owner, not the tenant.

Difference between Freehold and Leasehold-to-Ownership in Terms of Challenges

Through Freehold, ownership is possible only in areas specified for expatriates, whereas Leasehold-to-Ownership requires written approval from the original owner for any modification or change in the property.

Comprehensive Comparison between Freehold and Long-Term Leasehold-to-Ownership in Dubai

The following table presents a comprehensive comparison between Freehold and Leasehold-to-Ownership:

Element	Freehold	Long-Term Leasehold
Ownership Duration	Lifetime	50 – 99 years
Land Ownership	Property + land ownership	Property only, without land
Inheritance	Possible	Not possible
Sale and Disposal	Absolute freedom	Possible within contract terms
Annual Fees	Slightly higher	Relatively lower
Price	Higher, but a long-term investment	Lower, but temporary

Table 1: Difference between Freehold and Leasehold-to-Ownership in Dubai

When to Choose Freehold Ownership or Leasehold-to-Ownership in Dubai?

Below are some guidelines to help you make the optimal choice between these types of ownership in Dubai:

1. When to Choose Freehold Ownership?

   • If you are looking for a long-term investment.
   • If you want to obtain residency in Dubai through property.
   • If you intend to rent out the property and earn rental income.
   • If you wish to resell later and realize profits.

2. When Is a Long-Term Lease Contract Suitable for You?

   • If you want to live for a long period without buying.
   • If you have a limited budget.
   • If you prefer certain locations where freehold ownership is not available.
   • If your goal is personal use only and not investment.

Vision 2040 and Its Impact on Property Value in Dubai

With the launch of the Dubai Urban Plan 2040, the emirate is moving toward a greener, more developed, and more sustainable future. But how will this reflect on real estate? And do the benefits differ between freehold ownership and long-term leasehold? Below is an explanation:

1. Impact of the Dubai 2040 Plan on Freehold Ownership:

   • Significant growth in property and land values due to infrastructure development.
   • Direct benefit from improved quality of life and public amenities.
   • Strong incentives to invest in sustainability and enhance property value.
   • The owner enjoys the full returns from surrounding development.

2. Impact of the Plan on Long-Term Leasehold:

   • The tenant benefits only from quality-of-life improvements, not from land value appreciation.
   • Capital gains revert to the original owner once the contract expires.
   • Reluctance to invest in upgrades due to lack of property ownership.

In Conclusion

Choosing between freehold ownership and long-term leasehold in Dubai is not merely a short-term financial decision; it is a strategic choice that determines the nature of your investment, your level of control, and the future of your wealth. A comprehensive understanding of these dimensions is what distinguishes a successful investor in Dubai’s dynamic real estate market. It’s worth noting that Reach offers you properties that grant freehold ownership opportunities. Book your free consultation now and reserve your unit with the best real estate developers.

Frequently Asked Questions