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29.09.2024

Investments in the Emirates: attractive destinations and a choice of real estate

Dubai chocolate or investment projects in the UAE

The content of the article:

  • What makes the Emirates attractive to investors
  • Investment directions
  • Where do businessmen invest most often
  • Primary or secondary real estate market: what to look for

In just a few months, everyone who has never even been to the Emirates has learned about ”Dubai chocolate". That's the power of the Internet! And interestingly, it was invented, or rather invented by pastry chef Sarah Hamouda (of British-Egyptian origin), who did not even imagine that thanks to one video, the number of sales of her chocolate would increase 100 times. But it is not only chocolate that conquers in the Emirates. Over the past 10 years, the inflow of foreign direct investment has increased in the country, which has made the state in the Middle East one of the most attractive destinations for investors from all over the world. The UAE's policy is aimed at ensuring that as many businessmen as possible are interested in their investments. Well, why not:
individuals do not pay taxes on income, capital gains, interest, dividends, royalties, wealth, luxury, inheritance and donation.
A business is exempt from paying corporate income tax if the company's profit is less than 102000 USD. If more, then KN will be 9% of the profit.
VAT for legal entities is only 5% (in Europe, the average rate is 21%).

The main investment directions: 

  • business
  • stock market
  • government
  • funds investment
  • fund units real estate

 

Dubai is considered to be the most popular emirate among foreign investors. There are more than 30 free economic zones, where special tax and customs regimes operate, which in turn create a favorable investment environment.
Investing in starting a business — for this, entrepreneurs need to use modern technologies; contribute to research and development in the country; meet all the requirements of licensing authorities in the UAE; receive high added value from their product. 
According to Resolution No. 16 of 2020 “On determining a positive list of economic sectors and activities eligible for foreign direct investment and their ownership shares”, foreign investors will be able to create their own businesses in three sectors: manufacturing, agriculture and the service sector. If the established company is opened to another economic sector, the investor will be able to own only 49% of the shares of the business.
Investing in a ready—made business - when starting a business, investors face a number of certain difficulties, so many of them prefer to buy a ready-made working company. Before making a deal, it is necessary to study the financial situation of the company, the examination of contracts with customers and employment contracts with employees. Check the validity period of the licenses and the lease of the premises. Experienced businessmen always hire professional lawyers for this. After checking all the documents and signing the transaction agreement, it is better to close the old company account and open a new one so that there are no more financial obligations on the previous account. 
Investments in savings accounts — the investor transfers funds to a special bank account and receives a percentage from this. There is no single fixed rate for savings accounts in the Emirates, each bank has its own conditions. But the national average is about 1% per annum, which also depends on the amount of the deposit itself. The conditions for opening and maintaining accounts may change. For example, if the account is opened in dirhams, the rate will be 1% per annum, if in dollars, then 0.6%.
Investments in the stock market — both residents and non-residents of the country participate in trading on stock exchanges in the UAE. This is done directly through brokers, through which a trading account is opened, registered on one of the three stock exchanges in the Emirates: Dubai Financial Market, Abu Dhabi Securities Exchange, NASDAQ. 
Another option for investing in funds is becoming popular — ETFs, which can be considered as an example of passive investments. In this case, when buying an ETF stock, the investor receives several stocks and bonds in markets around the world. Investments in ETFs are more transparent and cheaper than index funds, so they are less risky for many businessmen. You can buy an ETF yourself, or you can consult experts on this issue and buy through them.
Real estate investments are the most common option for investing in a country in the eastern part of the Arab world. For many entrepreneurs, such an asset is stable and less prone to default.

Real estate ownership involves 2 options:

  • ownership by lease (the owner owns the building, but does not have any rights to the land)
  • full ownership (the owner owns both the building and the land on which this object is located)

The purchase of full ownership rights is allowed only to citizens of the Emirates and citizens of the Persian Gulf countries. However, foreigners can purchase real estate in full ownership in special areas — Freehold Zones. They are available in Dubai and Abu Dhabi. It is noteworthy that by buying a property in one of these areas, an investor will be able to obtain a golden visa to the UAE. The most popular areas for real estate investments in Dubai are Business Bay, Dubai Marina, Downtown Dubai, Dubai Jumeirah, Dubai Creek Harbor. You can read about them in our article
In Abu Dhabi, foreigners can buy land in such investment areas as the islands: Yas, Sadiyat, Lulu, Rome, Maria; beaches: Al-Raha, Sayh al-Sedaira, Al-Rif and Masdar City. 
In addition to buying, there is another type of real estate investment — these are REITs (real estate investment trusts). In this case, one company owns real estate and usually manages them. REITs most often own commercial real estate: from small offices to large shopping malls and hotels. Through this company, investors buy shares and, depending on the terms of the contract, trusts pay them dividends. 
The rental business is also another opportunity to profit from real estate in the Emirates. The annual rental income is about 7-9%, it is not taxed. According to our experts, over the past two years, rental rates for apartments and townhouses in Dubai have increased by an average of 30%, and for villas even more — by 60%. And most likely, the price may continue to rise, since tourists, specialists, and businessmen living in the UAE are constantly in need of housing. And given that the UAE government plans to occupy leading global positions in the IT and financial sector in the next 30 years, attracting qualified international specialists for this, the demand for rental housing will definitely not decrease.  
The main thing is that investors are allowed to buy both ready-made real estate and at the construction stage. At the same time, they can deposit the full amount immediately or apply for a mortgage. To obtain a golden visa and obtain a residence permit, the initial mortgage payment must be at least 50%. All contracts are drawn up in Arabic and English, so we advise entrepreneurs to involve experts to sign the contract, who will help in the design and will not make mistakes that negatively affect possible income. It is also important to take into account the fact that if the buyer violates the schedule of mortgage payments (overdue or not sent on the specified day), the transaction is canceled, and the investor will lose all invested funds and real estate. It is better to have a “backup option” on your account: 2-3 payments in advance. 


The period of residence permit in the UAE depends on the amount of investment:

  • for 2 years — real estate worth from 750,000 AED (you cannot resell the object during this period, otherwise they will be canceled, but you can rent it out)
  • for 10 years — real estate worth from 2 million AED (you can dispose of the object immediately)

 

Often, buyers are faced with a choice — to buy a new or secondary housing. At first, apartments in the primary real estate market were in demand more and were bought more often. However, over the past year, the demand for secondary housing has reached the same number as in the market of new buildings. This is primarily due to the influx of a large number of expats who move to the country with whole families and prefer already inhabited apartments in populated areas. 


What to look for when buying property from a developer in the UAE:

  • reputation (study reviews about the developer company: litigation, complaints about the quality of facilities)
  • the duration of its activity on the market (the longer such a company is on the market, the more likely it is that your facility will be delivered on time; small private companies may go bankrupt)
    presence of an escrow account (a prerequisite for licensed construction companies in the Emirates)
  • the experience of trouble-free implementation of previous projects (there were no delays and financial problems)
  • the

 

When buying real estate on the secondary market in the UAE, the registration takes place a little differently:

  • transactions are executed through persons with a brokerage license (it is important to pay attention to the term of such a license)
  • after selecting an object and agreeing on all the terms of the contract, the participants in the transaction sign three contracts (on the Internet portal of the Dubai Land Department): Form A – seller's and agent's agreement; Form B — buyer's and agent's agreement; Form F — preliminary purchase and sale agreement based on Forms A and B. 

 

If the transaction is completed in relation to the finished object, the buyer will receive the documents within seven days. If there was an assignment of rights to an object under construction, then the purchase and sale agreement will be reissued to a new buyer with the mandatory consent from the developer. It may take more than a month. 
When buying a second home, it is better to request an agreement with the previous seller, which contains information about the object and the primary cost. It is also necessary to check whether the previous owner paid for it in full. 
In the catalog of secondary real estate from VelesClub Int. all the objects have been checked by our experts and therefore the transaction processing process will be much easier and safer.
If you have been looking at the Emirates for a long time and want to become one of the investors, then it is better to start acting now, while the UAE market is quite open and promising. Our experts are ready to offer you various investment options.

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