Dubai Strengthens Its Position as a Global Real Estate Investment Hub

Dubai continues to solidify its position as a global real estate investment hub with the introduction of Decree No. 22 of 2022. The decree, which grants various privileges to Real Estate Investment Funds (REITs) operating within the Emirate of Dubai, aims to boost investment in the local real estate market, ensuring long-term capital returns for shareholders and attracting additional investment to the city.

Key Objectives of the REIT Decree

The overarching goals of the REIT Decree are twofold:

• Encouraging Investment in Real Property Projects: The decree is designed to attract more real estate investment funds, encouraging them to invest across various real estate projects in Dubai.
• Increasing Market Investment: By providing a clear framework and several privileges, the decree seeks to enhance investment flows into the real estate sector, benefiting both investors and the broader market.

Registration Requirements for Real Estate Investment Funds (REITs)

The REIT Decree outlines a detailed registration process, managed by the Dubai Land Department (DLD), for funds wishing to benefit from the privileges outlined in the decree. Below are the essential registration requirements and procedures:

• Licensing Requirement: The REIT must be licensed by a competent regulatory entity, such as the Securities and Commodities Authority (SCA) or the Dubai Financial Services Authority (DFSA) and must hold a valid license before applying for registration.
• Minimum Asset Value: The REIT must hold real estate assets valued at a minimum of AED 180 million at the time of registration. This valuation must be conducted by a DLD-accredited valuer.
• Valuation Process: The DLD will appoint an accredited valuer from the Real Estate Regulatory Agency (RERA) to ensure the REIT’s valuation meets the standards set out in the decree.
• Ongoing Compliance: Once registered, the REIT’s compliance with the asset value threshold will be monitored regularly by the DLD. This will include the submission of annual audited financial reports from an external auditor to the competent authority.
• Authorized Representative: An authorized representative must be appointed to manage the registration process, supported by a power of attorney or a board resolution.

Benefits of REIT Registration

Upon successful registration in the DLD’s Register of Privileges, REITs are entitled to several benefits that enhance their operational flexibility and investment potential:

• Foreign Ownership: There are no restrictions on foreign ownership within the structure of the REIT, offering more flexibility for international investors.
• Reduced Real Estate Registration Fees: REITs benefit from reduced real estate registration fees for various transactions:
  • AED 50,000 Fee for Founder Contributions: A reduced fee applies when a REIT founder contributes real estate to the fund.
  • 2% Fee on Acquisitions: A reduced 2% real estate registration fee applies when the REIT acquires and registers an asset in its name.
  • 2% Fee on Usufruct or Lease: A similar 2% fee applies when the REIT registers a usufruct or long-term lease right.
• Real Estate Rights in Non-Freehold Areas: REITs may obtain real estate rights in specific non-freehold areas, subject to approval by the REIT Committee, provided certain conditions are met.

Valuation Requirements During the REIT Registration Process

The Dubai Land Department (DLD) is tasked with ensuring that the registered REIT adheres to the prescribed valuation standards. To achieve this, the DLD appoints a RERA-accredited valuer to conduct a thorough valuation of the real property assets owned by the REIT.

This valuation is essential for the REIT’s initial registration and continues to play a key role in ensuring ongoing compliance with the asset value threshold throughout the life of the REIT.

The REIT Committee

The formation of the Real Estate Investment Funds Committee (REIT Committee), established under Executive Council Decree No. 36 of 2024, plays a crucial role in guiding the expansion of REITs in Dubai. The committee is responsible for determining which areas outside of the freehold zones in Dubai may be eligible for REITs to hold, under the following conditions:

• Absolute Ownership: The REIT may acquire full ownership rights in non-freehold areas with no time restriction.
• Usufruct Rights: The REIT may hold usufruct rights for up to 99 years.
• Lease Rights: The REIT may secure lease rights for durations of up to 99 years.

Additionally, the REIT Committee has the authority to approve or reject any transfer of real estate owned by the REIT in non-freehold areas. Any unauthorized transfer will be deemed void.

Conclusion

The REIT Decree represents a significant step forward in Dubai’s strategy to attract global investors to its real estate market. By offering various privileges and a structured framework, Dubai is positioning itself as a leading hub for real estate investment. Real Estate Investment Funds registered under this framework can now benefit from greater operational flexibility, reduced costs, and access to unique investment opportunities, all of which help bolster Dubai’s growing reputation as a top investment destination.

For companies and investors looking to capitalize on these privileges, understanding the registration process and compliance requirements is key to unlocking the full potential of the REIT Decree.

Malack El Masry, Partner and Head of Co-Com and M&A
Moustafa Samy, Associate