Freehold vs Leasehold Properties in Dubai: Key Differences Explained

Dubai’s real estate market is famous for its vibrant growth and investment opportunities. With an ever-expanding landscape of properties available, investors and homeowners often encounter the terms freehold and leasehold when considering their real estate options. These two property ownership structures can significantly impact the rights of owners, the duration of ownership, and the type of investment.

🇦🇪 Dubai:

– Top 20 globally for ease of doing business
– Bridge between East and West markets
– Free Zone company setup in 3-5 days
– 9% corporate tax, 0% in Free Zones under certain conditions
– 100% foreign ownership allowed

Both offer world-class infrastructure and support. pic.twitter.com/c5XIUbPqL3

— Alessandro Palombo (@0x_ale) October 29, 2024

This article explains the key differences between freehold and leasehold properties in Dubai, helping investors and buyers make informed decisions about their property investments.

Understanding Property Ownership in Dubai

In Dubai, the government has divided the property ownership laws into two main categories: freehold and leasehold. Each structure offers different rights and conditions for property owners. Understanding these distinctions is crucial before making a purchase.

Freehold Properties: Full Ownership Rights

A freehold property offers the highest level of ownership, granting the buyer complete ownership rights to the property. This means the buyer owns both the land and the building on it. Freehold properties are typically available to:

• UAE nationals
• GCC nationals
• Foreigners (in designated freehold areas)

For foreign investors, freehold properties that are among top property investment areas in Dubai for 2025 are an attractive option because they offer unrestricted ownership, providing a clear and straightforward path to property ownership in Dubai.

Leasehold Properties: Long-Term Renting

A leasehold property refers to a situation where the buyer owns the property for a fixed period, typically 99 years, but not the land on which the property is built. The land is owned by the government or another party, and the buyer leases the land for the specified period.

• The buyer only owns the building (or unit) on the leased land.
• Ownership is restricted to the lease term, after which the land and property revert back to the landowner.

Leasehold properties are popular in certain areas of Dubai, particularly for long-term residential leases, and are often less expensive than freehold properties. Investors interested in leasehold properties will need to understand the lease terms and conditions carefully.

Key Differences Between Freehold and Leasehold Properties in Dubai

Ownership Duration

• Freehold: The owner enjoys indefinite ownership rights. The property can be sold, transferred, or inherited at any time, with no expiry date.
• Leasehold: The lease agreement typically lasts for 99 years, after which the ownership of the land and property reverts back to the original landowner, unless the lease is renewed or extended.

Property Rights

• Freehold: Full ownership rights, including the land and structure. The owner has the freedom to modify, sell, or rent the property as they see fit.
• Leasehold: Ownership is limited to the property structure for the lease duration. The land is leased from a landowner, and the buyer must adhere to any restrictions set by the lease agreement.

Eligibility for Foreign Ownership

• Freehold: Available for foreign ownership in designated freehold areas in Dubai, such as Palm Jumeirah, Downtown Dubai, and Dubai Marina. Foreign buyers can own property without restrictions, subject to certain conditions.
• Leasehold: Generally not available for foreign buyers in most cases. However, leasehold properties are still commonly available for UAE residents, and some developers offer leasehold arrangements for foreign investors in specific areas.

Cost of Purchase

• Freehold: Freehold properties typically come at a higher cost due to the owner’s complete rights over both the property and the land. The price reflects the permanence and stability of ownership.
• Leasehold: Leasehold properties are generally less expensive compared to freehold properties. Buyers do not pay for the land, and the lease term reduces the total cost of ownership.

Resale and Transferability

• Freehold: Freehold properties are easier to sell, transfer, or rent out due to the permanent ownership. Owners can list their properties on the market and attract a broader pool of potential buyers or tenants.
• Leasehold: Reselling or transferring leasehold properties can be more complicated. The sale or transfer of leasehold properties often requires the approval of the landowner, and the resale value can be affected by the remaining duration of the lease.

Financial Considerations: Costs and Financing

Purchase Costs

• Freehold: Freehold properties often come with higher initial costs due to the land ownership aspect. Additionally, the cost of maintenance, taxes, and insurance is generally higher.
• Leasehold: Leasehold properties may be more affordable to purchase, but the buyer still needs to factor in costs such as rent payments (for the land lease) and maintenance fees. The longer the lease term, the higher the property’s overall cost.

Financing Options

• Freehold: Freehold properties are eligible for various financing options, including mortgages from banks or financial institutions in Dubai. Lenders often offer competitive terms, making it easier for buyers to secure financing.
• Leasehold: While mortgages are available for leasehold properties, the terms might differ compared to freehold properties. Lenders may require additional considerations due to the temporary nature of leasehold ownership.

Rental Income

• Freehold: Freehold property owners have full control over renting out their properties, whether it’s for short-term or long-term rentals. Many owners in Dubai’s luxury real estate market choose to rent their properties out for high rental yields.
• Leasehold: Renters of leasehold properties may also earn income from renting out their properties, but the rental terms and rights may be restricted by the lease agreement, depending on the landowner’s conditions.

Legal Considerations for Freehold and Leasehold Buyers

When considering purchasing either a freehold or leasehold property, understanding the legal aspects is essential.

Freehold Properties

• Registration: Freehold properties must be registered with the Dubai Land Department (DLD), ensuring that ownership rights are clear and legal.
• Inheritance: Freehold property can be inherited by heirs according to UAE law.

Leasehold Properties

• Lease Agreements: Leasehold property ownership is bound by a contractual agreement between the buyer and the landowner. The buyer should carefully review the lease terms, including the lease duration, renewal conditions, and restrictions.
• Expiration: Upon the expiration of the lease, the buyer may have the option to renew the lease or leave the property, depending on the terms set forth by the landowner.

Conclusion

When choosing between freehold vs leasehold properties in Dubai, potential investors and homeowners need to carefully assess their goals, budget, and long-term plans. Freehold properties offer full ownership and are ideal for those seeking permanent ownership with more flexibility in terms of resale and rental income. On the other hand, leasehold properties are suitable for buyers seeking more affordable options and long-term leasing without the need for land ownership.

Both options have their advantages and limitations that must be understood well. Whether you are investing in Dubai’s top suburb experiencing a real estate boom in 2025 or looking for a long-term family home, knowing your options will help guide your choice.

Homecubes is about to launch their property tokenization platform focusing on the Dubai real estate market. Do not hesitate to contact us for detailed information about our lucrative fractional property investment projects in premium properties across Dubai.