In a significant development, the Dubai Land Department (DLD) has announced an initiative allowing private property owners of all nationalities to convert their ownership of properties on Sheikh Zayed Road and in Al Jaddaf to freehold status. Officially unveiled on January 19, 2025, this policy affects a total of 457 plots, 128 along the bustling Sheikh Zayed Road (stretching from the Trade Center Roundabout to the Water Canal) and 329 in the Al Jaddaf area.
This groundbreaking move is part of Dubai’s Real Estate Strategy 2033, aimed at increasing real estate transactions by 70%, raising the market value to AED 1 trillion, and expanding the total value of Dubai’s real estate portfolios to AED 20 billion.
Understanding the Rationale Behind This Initiative
This pivotal step by the Dubai Land Department reflects not just a response to market dynamics but also demonstrates a strategic alignment with economic growth and foreign investment attraction. It enables long-term foreign investments in prime locations offering full credibility to investors through assured ownership rights.
Freehold properties are known to have higher valuations, making this initiative particularly enticing for high-net-worth individuals and developers. Furthermore, it enhances sustainability and growth within the real estate sector, emphasizing Dubai’s commitment to refining property ownership regulations.
Director General of the DLD, Eng. Marwan Ahmed bin Ghalita highlights that this initiative aims to “reinforce Dubai’s position as a global economic hub and a leading destination for real estate investments.”
Expected Benefits of the Freehold Conversion
The new initiative by the Dubai Land Department is poised to catalyze positive changes in Dubai’s residential real estate sector. Property owners have several benefits, including increased property valuations, greater desirability, and permanent ownership rights with full control over assets. This flexibility grants owners the liberty to sell, lease, or mortgage their properties more easily.
For investors, both local and international, this conversion initiative presents an unrestricted opportunity to invest and purchase property. It enhances return on investment (ROI) dynamics in Dubai’s market, where freehold properties typically show faster appreciation. Additionally, freehold status streamlines mortgage approvals, as banks generally favor financing options for freehold properties.
On a macro level, we can expect increased demand in Dubai real estate as buyers are drawn to prime locations. Furthermore, this initiative is likely to stabilize the real estate market by improving the investment climate, ultimately enhancing rental yields. Experts at Kismet Elite Properties anticipate that freehold areas will continue to attract premium tenants, resulting in higher rental returns.
Potential Risks of the Freehold Conversion Policy
While this new government policy brings numerous advantages, it’s essential to remain aware of potential challenges, particularly regarding conversion costs. According to the DLD statement, property owners must pay a fee equivalent to 30% of their property’s valuation based on gross floor area to complete the conversion. This substantial fee could deter some homeowners on Sheikh Zayed Road and in Al Jaddaf, potentially limiting participation.
Besides, experts are concerned that the introduction of freehold status may result in market speculation and price volatility. It can culminate artificial inflation of property values in these specific areas, Sheikh Zayed Road and Al Jaddaf area. This scenario could lead to overvaluations and extended sale cycles. Moreover, leasehold properties in non-freehold areas may see diminished desirability as investors prioritize freehold options, resulting in market imbalances.
Conclusion
In summary, the freehold conversion policy introduced by the Dubai Land Department is poised to transform Dubai’s real estate landscape. While it promises to elevate property values, attract foreign investments, and fortify market stability, stakeholders must also prepare to navigate challenges such as high conversion costs and potential speculative price increases. Property owners can verify their eligibility for this initiative and initiate the conversion process through the “Dubai REST” smart application. It will facilitate the submission of applications for land assessment and valuation on Sheikh Zayed Road and Al Jaddaf area.
