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Dubai Pondering Introduction of the Property Visa Law

Dubai Pondering Introduction of the Property Visa Law

Property Magazine

10 June 2011

By: Ludmila Yamalova, Managing Partner, HPL Yamalova & Plewka DMCC

About two years after the abolition of Dubai’s so-called property visa, Dubai is talking about its re-introduction.  The legal form of the new property visa, however, will not be the same as its predecessor.  In fact, it will not really be a property visa, but rather a business visa.  As such, it will not be governed by the immigration law, which is subject to the U.A.E. federal regulation, but rather companies’ law, regulation of which is largely reserved for the individual Emirates.

In fact, the reason for the retraction of Dubai’s and other Emirate’s previous property visa was because, in 2008, the U.A.E. made a decision in favour of a uniform federal immigration policy.  Until then, in the absence of an expressed law to the contrary, Dubai, and later Ras Al Khaimah and Ajman, had developed a practice of granting three-year renewal residence visas to property owners through special arrangements between the master developers and the respective immigration authorities of each Emirate.  That practice was just that, practice, and not the law.  And most sales and purchase agreements, which provide for issuance of property visas, expressly state that the validity of the property visa is subject to the prevailing laws and, as such, not guaranteed.  Therefore, when the decision came down at the federal level to bring immigration under the uniform fold, the repeal of the property visa practice was quick to follow.

In its place, there were discussions of the introduction of a federal property visa law.  For a while, those discussions were so active as to even elicit specific details of the alleged new requirements.  For example, the visa would be issued for a six-month term.  Only properties valued at the minimum price of one million Dirhams would qualify.  A monthly income of ten thousand Dirhams would be required, along with the medical insurance.  The federal decree that was supposed to codify that law, however, has yet to be published.  Therefore, as of today, there is no expressed evidence of it ever being enacted.

In the meantime, the abolition of the property visa has left many investors, who relied on it in buying their real estate, in a confusing state.  This concerns especially those investors who have purchased homes in Dubai as their secondary or vacation homes.  As such, they do not reside in Dubai and therefore do not qualify for any other type of visa.  But because so much of every day to day life in the U.A.E., Dubai including, is tied to the residence visa, these investors are now faced with all sorts of inconveniences, not to mention paradoxes.  For example, these same investors can own a villa, but cannot own a car.  This is because to register a car requires a residence visa.  Thus, there are investors who own villas on the Palm, Emirates Hills, etc., where for the last several years they kept their legally bought cars, but cannot now renew those cars because they no longer have a visa.  Unable to find any other viable options, many such investors are registering cars on the name of their friends.  Such solutions, however, are not workable over a long period of time.

Maybe it is such examples that are the reasons behind Dubai’s recent drive to explore new avenues to offer some form of a residence visa linked to property ownership, bearing in mind that immigration remains to be the domain of the federal government.  Regulation of its economic free-zones is the domain subject to Dubai’s own legislation.  It is under this authority and scheme that Dubai is now contemplating offering residence visas for those who invest in its real estate.

The new visa would thus be based on the formation of a free-zone company, the sole purpose of which is to own property.  The company would be 100% owned by the investor and would be the registered owner of the property.  The company will have the legal basis to issue visas to the company’s shareholders, much as any other U.A.E. company issues visas to its employees.  The visa would remain valid as long as the company exists.

In order for new visa scheme to have the desired effect of bringing investors back to Dubai, the costs and procedures for setting up such companies must be significantly less expensive and cumbersome from those that exist today.

One, the costs must be affordable and transparent.  The Company formation is usually accompanied by high and often hidden fees, including not only set-up fees, but also annual renewal and winding down fees.  Therefore, fees for forming and managing a property company would have to be minimal, especially as they are in addition to the fees associated with buying and owning property.  Furthermore, there must not be a requirement of leasing an office space, as is the case with any U.A.E. registered company and is the source of great additional expenditure.

Two, the formation of such companies must be an efficient process.  It must allow for a quick set-up, bearing in mind that the investors, whom this new visa scheme aims to attract, do not reside in Dubai.  It is unrealistic to expect them to remain in Dubai to oversee formation of the company, pass administering the purchase of the property.

Three, a number of procedural issues would have to be clearly spelled out.  This would include a mandate as to which free zones would qualify to register companies to own properties and which real estate locations would qualify under this scheme.  There would need to be clear guidance on whether the number of visas a company could sponsor would correlate to the number of its shareholders or the size of the property, as is the case with free zone companies.  The question of dependents would also need to be addressed.  There should not be a requirement of an annual audit, as is the standard with free zone companies, resulting in additional costs and procedures.

These are just some examples of the issues that need to be considered thoroughly in introducing the new regulation on the property visa.  If done correctly, such new regulations will undoubtedly bring many new investors back to Dubai.  Despite the crisis and its associated pains, Dubai remains a very desirable destination for a large part of the world’s population.  Investors want to not only invest hard cash into Dubai, but they also want to raise their families here.  Many want to use it as a base for their businesses worldwide.  Or they just want to have a vacation home to retreat to.