Owning Real Estate in Dubai using an ADGM SPV

  • 22-05-2019

Dubai opened its doors to foreign property ownership in 2006. Since then, there have been incremental changes in the approach of the Dubai Land Department, benefitting investors in the long-term. Allowing a common-law vehicle such as an ADGM SPV to hold real property in Dubai has been a significant change.

Who can own property in Dubai?

Ownership of real estate in Dubai is restricted to UAE Nationals and GCC nationals, as well as companies wholly owned by them and public joint stock companies.

Other 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. These include both residential and commercial areas in and around Dubai, and include Downtown Dubai and Burj Khalifa, The Palm, Emirates Hills, The Meadows, The Lakes, The Springs, Dubai Marina and Jumeirah Lakes Towers.

The investor is not required to hold any type of residency or similar permits in order to purchase real property.

Can I register the ownership of my property under a BVI or Cayman Offshore company?

Initially, the DLD allowed all types of onshore and offshore companies to own real estate in Dubai. In 2012, it made a change in policy, allowing only JAFZA Offshore companies as corporate holders of Dubai property. The DLD had not, however, applied any restrictions on the structure of the corporate offshore entity, so that a JAFZA offshore company could, in turn, be owned either by an individual or a foreign offshore company, such as a BVI company. While this is permissible, in practice, this calls for a lot of additional compliances (Certificates of Incumbency, updated Powers of Attorneys etc.) and attestations from Embassies and Ministries, that are time-consuming and cost additional money.

Significant changes

In 2018, the Dubai Land Department entered into an MoU with the Abu Dhabi Global Market (ADGM), thus allowing investors to tailor structures for real estate ownership, under a more familiar Common Law framework.

What kind of corporate vehicles are available in the ADGM, for real estate ownership?

As it stands, all ADGM-registered entities are eligible for ownership of real estate in Dubai. However, from a cost and efficient structuring perspective, the following vehicles may be considered:

Special Purpose Vehicles (SPVs)

You can read more about ADGM SPVs here: 

https://10leaves.ae/publications/adgm/establishing-an-spv-in-the-adgm

Foundations

You can read more about ADGM Foundations here : 

https://10leaves.ae/publications/adgm/adgm-foundations-regime

What are the benefits of registering properties in the name of an ADGM SPV?

Registering property in Dubai in the name of an ADGM SPV offers many benefits.

  1. Consolidation of holdings – Having a single ADGM SPV as the corporate owner of multiple properties helps consolidate real estate holdings for easy management and transfer.
  2. Separation of liabilities – An ADGM SPV allows for separation of such real estate assets from personal liabilities. In some cases, one can use an ADGM SPV in conjunction with an ADGM Foundations to allow for the actual transfer of assets, and remote control of the same.
  3. Securitisation of assets – Having a corporate structure allows for securitsation of real estate assets.
  4. Reduced costs – An ADGM SPV is a locally-registered entity, as opposed to a foreign offshore structure such as BVI. Documents of foreign offshore structures have to undergo expensive attestations in order to be used for transactions within the UAE.

Will the ADGM SPV be subject to Sharia-based inheritance procedures?

One of the main reasons for using an offshore company vehicle to purchase real estate in Dubai is the avoidance of Sharia-based inheritance procedures and the application of the Personal Status Law.                

As corporate entities do not fall under the personal status law, there would no issue of Sharia law applying.

Also, since the ADGM is a Common-Law jurisdiction, the inheritance procedures are greatly simplified. On the event of the death of the shareholder, the shares held by the ADGM SPV are transmitted in accordance with Common Law and hence Personal Status Law does not apply.

In the case of Muslim shareholders, Sharia may still be applied.

Change of ownership

A change in ownership where an individual owner is involved, involves a 4% transfer fee payable to the DLD. Where the property is held by an ADGM company, a change in shareholding of such a company will require a No-Objection Certificate (NOC) from the DLD, prior to the proposed shareholding change. The NOC will be issued subsequent to the payment of the 4% transfer fee.

In some cases, there may be a transfer from an individual name to an entity setup by the same individual. Here, the DLD may consider the transaction as a ‘gift transfer’, which is subject to a reduced transaction fee of 0.125%.

The Registration Authority (RA) of the ADGM has strict policies regarding change of ownership, and the subject entity (that holds real estate in Dubai) will have to submit a written undertaking confirming prior intimation to the Registrar in case of an imminent change.

What documents are required in order to register property in the name of an ADGM SPV?

  • Original Title Deed Original Certificate of Incorporation / Trade License
  • Original Memorandum and Articles of Association
  • Legal Translation of the Memorandum and Articles of Association
  • Original Certificate of Good Standing (not more than 6 months old)
  • Original Certificate of Incumbency (not more than 6 months old)
  • Copy of shareholder(s) passport(s)
  • Original Resolution approving the sale or purchase (as the case may be)
  • Original Power of Attorney
  • Attorney’s original passport

The DLD may require all corporate documents until the individual ultimate beneficial owner(s) (UBO) has been established.

Are you looking at setting up an SPV in the ADGM? Do get in touch with us. 

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