Plans by the Dubai Government to allow the resale of land received as a gift from the state may attract institutional investors that have been inactive in the property market. A recent decree enabling nationals to register, mortgage and resell industrial and commercial land that was given by the Government came as the market continued to struggle for recovery from sharp declines in property values.
"We believe the recent ruling that permits UAE nationals to formally register gifted commercial and industrial real estate titles at the Dubai Land Department will be a positive stimulus to the Dubai real estate sector," said a report by the Dubai bank Emirates NBD. "Gifted real estate is usually in some of the best, most established locations. The buildings that exist on gifted land parcels are in almost all cases held under single ownership. For these reasons, such buildings are much more attractive to asset managers and other institutional investors."
It is common for the Ruler to give land to UAE citizens and government entities. But strict restrictions have accompanied this ownership. "It is forbidden to resell them unless you get a special authorisation from the diwan, and you cannot mortgage them except if you want to build on them," said Karim Nassif, a partner at the Dubai law firm Habib Al Mulla. According to the recent decree, lands granted for commercial and industrial purposes can now be owned on a completely freehold basis provided certain requirements are met.
These include securing a valuation from the Dubai Land Department, modifying the title deed and paying 30 per cent of the value of the land to the department. "It creates great potential for the property sector in the UAE and for the industry, because it will stimulate transactions between nationals," said Matthew Green, the head of research at the property consultancy CB Richard Ellis (CBRE) in Dubai.
"They are trying to develop the industrial sector and generate some income both for the Government and the owners - a win-win strategy that is part of Dubai diversifying its economy." While property in some areas of the emirate has lost as much as 50 per cent of its value since the autumn of 2008, industrial property has fared comparatively well. CBRE said industrial land had lost about 20 per cent of its value from the 2008 market peak.
Philip Corfield-Smith, an associate in the Dubai office of the international law firm Pinsent Masons, said the law could spur fresh development. "This land has been immovable and off-market with no prospects of transfer for years," Mr Corfield-Smith said. "Some of it is located in very prominent positions, along Sheikh Zayed Road for instance, and has never been developed just because the individual person has other priorities."