Developers may forfeit residency sales incentive

Long-term residency rights will no longer be guaranteed under proposed visa reforms.

One of the key concerns behind the review is the need to better control who is issued with a residency visa.

DUBAI // Property developers would no longer be able to lure foreign buyers by guaranteeing the right to long-term residency, under proposed reforms of the way visas are issued. Under the current system, prospective homeowners seeking residency rely on the property developer to act as the sponsor for a visa. The visa, which allows the holder to live in the emirate, but not to work, is a significant incentive for many buyers.

Now, a committee formed to review the way visas are granted has proposed that the title deed for a freehold or long-term leasehold property would itself qualify a buyer to apply for a residency visa, cutting the developer out of the process. One of the key concerns behind the review is the need to better control who is issued with a residency visa. According to a member of the committee, the new scheme would stop developers being able to say they can "guarantee" buyers a visa - a claim that helps companies to sell properties but is by no means guaranteed and gives prospective investors false hope.

RERA, the regulator of Dubai's property market, recently criticised developers that promoted housing projects in this way, pointing out that all visa applications were subject to approval from the Department of Naturalisation and Residency (DNR). Under the recommendations, which are now being considered by Dubai's highest authorities, the current three-year renewable residency visa for property buyers would be replaced with a multiple-entry visa, valid for five years.

Mohammed Sultan Thani, the director of development and marketing administration at the Dubai Land Department, which formed part of the committee with representatives of Dubai police and the DNR, said authorities had been compelled to review the visa situation by the impending formation of homeowners' associations, which would manage the common areas of buildings. "At the moment, property owners can be sponsored by the developer, as if you were working for them, and your visa belongs to them," he said.

"But how can you have owners' associations comprised of people sponsored by the developer? If there are any clashes between the members of an association and the developer, the developer has the power to cancel their visas." Now, he said, "the idea is for people to apply directly to the Department of Naturalisation and Residency using their property title deed as the 'sponsor', with the condition that you give up your status if you sell the property".

Mr Thani said the committee had also proposed making available multiple-entry visas valid for five years. However, no firm recommendations had been made about the maximum length of each visit. Despite media reports suggesting that doubts over the entitlement to residency visas would cool interest in the property market, Mr Thani believed that few investors would be concerned. "Many people are buying property as an investment or to let, not for a visa to settle here." The majority of buyers, he said, lived in Dubai on employment visas.

However, Billy Rautenbach, the operations manager at Better Homes, disagreed. She said the possibility of a residency visa was one of the main attractions of the Dubai housing market for citizens of Iran, Iraq, Russia, Slovakia, India and Pakistan. "We definitely have people that come here and say, 'I want to buy a property so I can get a residency visa'," she said. "We tell everybody that a residency visa is not guaranteed and that you have to make an application."

As Dubai's property market matured and investors eyed the emirate as a tax-free retirement destination, the provision of residency status was expected to become increasingly significant, she said. According to the estate agents Colliers International, almost 160,000 residential units will be launched on the local market by the end of 2010, with the majority of occupants expected to originate from outside the UAE.

RERA says some developers use the offer of a "guaranteed" residency visa with a freehold property purchase as a tool to attract overseas investment. Some companies even charge "processing fees" of more than Dh1,500. Both practices, it says, are frowned upon. Although a project's master-developer can act as the sponsor for buyers seeking residency, they cannot guarantee applications will be successful.

The decision lies with the DNR, which takes factors such as the applicant's finances into account. * The National