What was the Real Difference between Freehold and Leasehold Property in Dubai as a Buyer?

Probably the two terms that have resonated in your ear when you have started to research property in Dubai are freehold and leasehold which seem both legal and to some extent daunting.

They are not so much technical terms. They have a direct impact on your rights as a property owner, the amount of time you can possess the property as well as the actions that can be done to the property. The good news? The difference is not complicated when its meaning has been expounded in ordinary language.
Let's make it clear.

What Is Freehold Property?

Freehold implies you own the property in its entirety - both the unit and the portion of land on which the building it is located (in a building, ownership rights only in the building itself).
As a freehold owner, you can:

• Sell the property
• Rent it out
• Pass it to your heirs
• Redo (according to building regulations)
• Keep it for life

The ownership has no time limit.
The freehold by foreigners is available in specific locations in Dubai, which comprise most of the popular areas in the city.

What Is Leasehold Property?

Leasehold implies that you are entitled to use the property over a given period of time but you cannot get the land permanently.
Lease periods are often:

• 30 years
• 50 years
• 99 years

The right of ownership is usually reverted to the owner of the land after the expiry of the lease unless the lease is renewed. You are free to continue living in the property as well as renting it or sell off your remaining lease period but you are working within a time period.

The Essential Difference in a Single Line

Freehold = permanent ownership.
Leasehold = rights of long use, not of ownership.

In which locations are the freehold properties found?

The greater part of the residential and investment locations in Dubai are open to foreigners as freehold zones. These include:

• Dubai Marina
• Downtown Dubai
• Palm Jumeirah
• Business Bay
• Jumeirah Village Circle (JVC)
• Dubai Hills Estate

International buyers like such areas due to the full ownership.

Why Would Anyone Select Leasehold?
Good question.

Leasehold properties occasionally:

• Be situated in developed locations.
• Offer lower purchase prices
• Buyers of suits who do not have intentions of owning property on a long term basis.

To other investors, a 50-99 year lease can be satisfactory to their purposes.
However, freehold is normally preferred in long term ownership and inheritance planning.

How It Affects Resale Value

The freehold properties usually have:

• Stronger resale demand
• Bigger attraction to global consumers.
• Long-term security

Properties that are under lease are more difficult to sell with the expiry of lease being shorter. There is a huge difference between a house that has 90 years to live and that which is left with 20.
Time affects value.

What About Rental Income?
Freehold and leasehold owners are generally free to rent their homes (providing lease conditions and building regulations).
As far as rental is concerned, tenants do not tend to be concerned with the ownership structure, instead they are concerned with location, condition and price. The effect is more on long term value of investment than on short term rent.

Planning and Long-term Inheritance
With regard to passing of property to heirs, freehold ownership is more apparent. The leasehold properties might have some extra legal issues relative to the remaining tenure and the local regulations.

It is due to this reason that buyers are more inclined to generationally favor freehold.

Financing Differences
The banks are mostly more at ease with giving loans on freehold properties. The lending conditions can be more strict when it comes to leasehold property particularly those whose remaining terms are less than ten years.

The security of ownership has an impact on financing.

Is Leasehold Risky?
It does not necessarily have to be so; however, it needs to be mindful.

A good location with a long lease (such as 99 years) can be considered a good option as well. There are issues when buyers are not aware of:

• The lease period is not as long as anticipated.
• Renewal terms aren't clear
• At the expiry of the lease, resale becomes hard.

It is essential to know the timeline.

Which One Is Right for You?

Choose freehold if you:

• Want full ownership rights
• Plan long-term holding
• Want easier resale
• Think about inheritance

Consider leasehold if you:

• Have a less long investment horizon.
• Want a lower entry price
• Can accept long-term ownership.

Final Thoughts

Freehold vs leasehold is not the issue of good vs bad but rather the issue of ownership power and time.

The permanence and flexibility are available in Freehold. Leasehold is available, at reduced rates, but with restrictions.

There is always one question to be asked before making a purchase:
“My possession of this is only temporary.”

That is the answer that makes it all.