Abu Dhabi Global Market (ADGM), an established free-zone and international financial centre in Abu Dhabi was legally established pursuant to Federal Decree Number 15 of 2013 and Abu Dhabi Law Number 4 of 2013 (the ADGM Founding Law). ADGM attracts several international business and investors to the free-zone, primarily due to the adoption of the English Common Law as the cornerstone of its legal and regulatory framework.
The ownership of the real estate in Dubai is governed by Law Number 7 of 2006 concerning Real Estate Registration in Dubai and is restricted to the UAE and GCC nationals and the companies wholly owned by them as well as public joint-stock companies. The foreign nationals and companies wholly or partly owned by them have the right to own real estate in Dubai but only in certain designated areas, the residential and commercial areas, including Downtown Dubai and Burj Khalifa, The Palm, Emirates Hills, The Meadows, The Lakes, The Springs, Dubai Marina and Jumeirah Lakes Towers.
How can an ADGM Entity Own Properties in Dubai?
The Dubai Land Department (DLD) initially permitted all types of onshore and offshore companies to own real estate in Dubai. In 2012, it introduced a change in its policy, permitting only Jebel Ali Free Zone Authority (JAFZA) Offshore Companies as corporate holders of Dubai property. The JAFZA offshore company could, in turn, be owned either by an individual or a foreign offshore company, such as a British Virgin Islands (BVI) company. In 2018, the DLD entered into a Memorandum of Understanding (MoU) with the ADGM, thus allowing investors to tailor structures for real estate ownership, under a more familiar Common Law framework. ADGM incorporated entities are now permitted to own land and property in the areas of Dubai designated for foreign ownership pursuant to the MoU between the ADGM and the DLD and structure their businesses in ADGM accordingly.
For registering property in Dubai under an ADGM entity, the following rules and procedures shall apply:
- The DLD will register properties in the name of an ADGM entity as per its own rules, regulations and conditions and subject to the Law Number 7 of 2006 of Dubai;
- The DLD shall rely on a Certificate of Incumbency issued by the Registration Authority of ADGM for ensuring the registration and licensing by the Registration Authority of ADGM as of the date of the Certificate of Incumbency;
- The shareholders in the ADGM entity are either natural persons or companies whose shareholders can be verified by the DLD. However, the ultimate shareholders can be identified by relying on additional information requested by the DLD to the Registration Authority of ADGM;
- For ADGM entities which are owned by a combination of natural and corporate persons, the DLD approval may be subject to compliance with specific conditions and submission of certain documents including a No Objection Certificate issued by the DLD approving the ownership of properties in Dubai;
- An 'Acknowledgement and Undertaking Letter' in the form issued by DLD concerning the disclosure of future shareholding transactions must be signed and submitted by all the shareholders or directors of the ADGM entity to the DLD;
- Fees concerning the registration, transfer and cancellation must be paid in full directly to the DLD. Change in ownership for an individual owner involves a 4 percent transfer fee payable to the DLD. A change in shareholding of a company where the property is held by an ADGM company will require a No-Objection Certificate (NOC) from the DLD subsequent to the payment of the 4 percent transfer fee, but prior to the proposed shareholding change. However, for a transfer from an individual name to an entity set up by the same individual, the DLD may consider the transaction as a 'gift transfer', subject to a 0.125 percent transfer fee.
The ADGM branches of foreign companies and listed public companies are outside the scope of the MoU, and the ADGM trusts and foundations are not permitted currently to own properties in Dubai, whether directly or indirectly.
The easiest method of property ownership is through ADGM SPVs. The Special Purpose vehicles (SPVs) may serve as a special purpose for professional investors, or investment institutions for securitizing assets or investing in real property.
Registering property in Dubai in the name of an ADGM SPV tends to offer several benefits, for instance:
- Having a single ADGM SPV as the corporate owner of multiple properties can help in consolidating real estate holdings for easier management and transfer.
- An ADGM SPV separates the real estate assets from personal liabilities.
- Having a corporate structure allows for the securitization of real estate assets.
- An ADGM SPV being a locally-registered entity is at reduced costs, as opposed to a foreign offshore structure such as BVI for the documents of foreign offshore structures undergo expensive attestations to be used for transactions within the UAE.
- The ADGM, being a Common Law jurisdiction, has the inheritance procedures greatly simplified as the shares held by the ADGM SPV are transmitted as per the Common Law, and hence Personal Status Law does not apply on the event of the death of a shareholder. However, in the case of Muslim shareholders, Sharia may still be applied.
The UAE continues to develop an unparalleled real estate sector to bring forth new initiatives to bolster the ease for investors. The cooperation between ADGM and the DLD aims to streamline regulations to further enhance accessibility into the real estate market. The MoU serves to augment the sustainable growth of the real estate sector. The DLD, previously limited to free zones in Dubai, has gained access to the financial free zone in Abu Dhabi through the MoU, thus providing facilitated and transparent services for all investors and consolidating the vision to position Dubai as the world's premier real estate destination. Investors must obtain proper counsel and advice from lawyers in Dubai or law firm in Abu Dhabi and further undertake proper and effective due diligence before acquiring real estate.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.