Buying a second home in the United Arab Emirates involves more than choosing the right neighbourhood, apartment, villa, or townhouse.

There are several things you need to check to make sure you purchase the perfect property for family weekends, a retirement home, or a rental.

1. Property ownership regulations

UAE and GCC nationals and non-UAE nationals have different property ownership rights.

UAE and GCC nationals can buy a home anywhere within the country. However, foreigners can only purchase property in designated freehold areas for full ownership.

A freehold property gives the buyer full ownership of the home and the land it sits on, with the freedom to sell, lease, or pass it on as inheritance.

Leasehold ownership, on the other hand, grants the owner the right to use the property for a fixed period of 25 to 99 years. The land itself remains owned by another party. This comes in four different systems:

• Ownership: This system grants expats ownership deeds of residential units for 99 years. The owner can let go of the property, but not the land, as they see fit, after the specified period.

• Musataha: Under this system, foreigners can own residential property for 50 years, which can be renewed for the same period. Owners can make improvements or renovations to the home.

• Usufruct: Under this system, expats can own a residential unit for 99 years, but are not allowed to make any changes to the property.

• Long-term lease: This system pertains to leasing the property for 25 years or longer.

Understanding these four systems can help you select the best property for your investment goals. This is particularly important if you plan to buy a home to rent out, as some communities may have strict rules about it.  

Property ownership and residency visas

Buying a property in the UAE allows you to apply for a residency visa, but you need to meet certain requirements.

For instance, you can apply for a two-year Real Estate Owner Visa if you earn at least AED 10,000 every month. You also need to invest in a pre-built, habitable home.

1. Property ownership regulations

UAE and GCC nationals and non-UAE nationals have different property ownership rights.

UAE and GCC nationals can buy a home anywhere within the country. However, foreigners can only purchase property in designated freehold areas for full ownership.

Difference between freehold and leasehold properties

A freehold property gives the buyer full ownership of the home and the land it sits on, with the freedom to sell, lease, or pass it on as inheritance.

Leasehold ownership, on the other hand, grants the owner the right to use the property for a fixed period of 25 to 99 years. The land itself remains owned by another party. This comes in four different systems:

• Ownership: This system grants expats ownership deeds of residential units for 99 years. The owner can let go of the property, but not the land, as they see fit, after the specified period.

• Musataha: Under this system, foreigners can own residential property for 50 years, which can be renewed for the same period. Owners can make improvements or renovations to the home.

• Usufruct: Under this system, expats can own a residential unit for 99 years, but are not allowed to make any changes to the property.

• Long-term lease: This system pertains to leasing the property for 25 years or longer.

Understanding these four systems can help you select the best property for your investment goals. This is particularly important if you plan to buy a home to rent out, as some communities may have strict rules about it.  

Property ownership and residency visas

Buying a property in the UAE allows you to apply for a residency visa, but you need to meet certain requirements.

For instance, you can apply for a two-year Real Estate Owner Visa if you earn at least AED 10,000 every month. You also need to invest in a pre-built, habitable home.

What is the loan-to-value (LTV) ratio?

The LTV ratio pertains to the loan amount the bank can lend you relative to the property’s value. The UAE Central Bank regulates this ratio to ensure fair rates are being implemented.

The LTV ratio for UAE nationals buying a second home is 65% of the property value. For foreigners, it’s 60% of the total property value.

For example, if you are a UAE national interested in buying a home worth AED 5 million, the maximum mortgage is 65% of the total price. You need to pay at least a 35% deposit.

If you are a non-UAE national, the maximum mortgage you will be granted is 60% of the total property price. The required deposit is 40% of the property’s value.

Review the interest rate, repayment terms, and associated fees as well to ensure the mortgage fits your budget.