Legal Framework and Property Ownership Rights for Foreigners in Dubai

Genesis and historical significance of property law in Dubai

The rise of Dubai as a global economic hub and a magnet for international investors is inextricably linked to the evolution of its real estate legal framework. Before the turn of the millennium, the real estate market in the emirate was practically closed to foreigners, as legislation was based on traditional concepts that restricted land ownership solely to UAE nationals and, to a limited extent, citizens of the Gulf Cooperation Council (GCC) countries. A major turning point occurred in May 2002, when the then Crown Prince, Sheikh Mohammed bin Rashid Al Maktoum, issued a decree that for the first time allowed foreigners (non-GCC nationals) to acquire freehold property in specific designated areas. This revolutionary step, however, required a solid legislative foundation to define registration processes, rights protection, and transfer mechanisms.

This foundation was established by Law No. 7 of 2006 concerning Real Property Registration in the Emirate of Dubai, promulgated on March 14, 2006. This law was not merely a technical regulation for record-keeping; it became a fundamental pillar that brought transparency, legal certainty, and institutional order to the dynamically developing market. Prior to its adoption, there was a significant vacuum regarding the recording of non-resident rights, creating space for uncertainty about long-term investment protection. Law No. 7 eliminated this uncertainty by establishing the Dubai Land Department (DLD) as the sole authority for real estate registration and defining the "Property Register" as the indisputable source of truth regarding ownership.

From the perspective of experts at the ARROWS law firm, this law is the starting point for any consideration of property purchase in Dubai. Our Prague-based attorneys emphasize that without understanding the mechanisms of this law, an investor is exposed to risks associated with the invalidity of contractual arrangements that would conflict with the mandatory provisions of this regulation. Indeed, Article 26 of Law No. 7 of 2006 clearly states that any agreement or disposition made in violation of its provisions is absolutely null and void, and this nullity can be challenged not only by any of the parties but also by the DLD, the public prosecutor's office, or it can be declared by a court of its own motion.

Analysis of key provisions of Law No. 7 of 2006

The law is structured into ten chapters and contains 27 articles covering everything from definitions of basic terms to final provisions on the repeal of previous decrees that conflicted with the new regulation. For an in-depth understanding of the market, it is necessary to analyze the individual aspects defined by the law.

Definition of real estate and units

Article 2 of the law defines Real Property as anything fixed to the ground that cannot be moved without damage or alteration to its structure. This broad definition includes not only land plots but also buildings and any permanent structures on them. The law further operates with the term "Real Property Unit," which is a specific part within a defined area that may include a building or part thereof, and which is identified in maps approved by the DLD. This precise technical definition enabled the creation of a system of plot numbers and unique identifiers, which are the basis of the modern Dubai land registry.

Exclusive powers of the Dubai Land Department (DLD)

Article 6 of the law grants the DLD a monopoly position in the field of real estate registration. This centralization is key to market stability. According to ARROWS' analysis, it is important to note that the DLD is not just a passive registrar but possesses extensive executive and regulatory powers, including:

• Designating areas for surveying and certifying maps that form the basis for property identification.
• Preparing and approving standard contract documents, which standardizes real estate transactions and reduces the scope for fraudulent conduct.
• Regulating and maintaining the register of real estate brokers, ensuring that licensed entities subject to supervision operate in the sector.
• Valuing real estate and establishing rules for voluntary public auctions.
• Setting fees for all services provided by the department, which brings predictability to transaction costs.

Legal effects of registration and absolute probative value

One of the most significant provisions is Article 7, which declares that the Real Property Register (Land Registry) has absolute evidentiary power against all parties. The data recorded therein cannot be challenged unless it is proven to be the result of fraud or forgery. This legal fiction of the accuracy and completeness of the record is what attracts institutional investors, as it eliminates risks associated with hidden defects in title, which are common in less developed jurisdictions.

Furthermore, Article 9 of the Law stipulates that no transaction that creates, transfers, modifies, or terminates a real estate right has legal effect until it is registered in the register. This means that the mere signing of a Sales and Purchase Agreement (SPA) without subsequent registration with the DLD does not establish ownership, but only a contractual relationship. If the seller breaches their obligation to transfer the right, their liability under Article 10 is limited to the payment of indemnity, regardless of whether such compensation was explicitly agreed upon in the contract.

Typology of Ownership Rights for Foreigners in Dubai

Law No. 7 of 2006, in Article 4, defines who can own real estate in the Emirate of Dubai. While the market is open without restriction to UAE and GCC nationals, for other nationalities, ownership is subject to the Ruler's approval and limited to designated areas. This dichotomy has led to the emergence of two basic ownership models, which our Czech legal team at ARROWS analyzes in detail for their clients.

Freehold – Full and Unrestricted Ownership

In designated areas (so-called Designated Areas or Freehold Zones), foreigners can acquire full ownership rights to the property as well as a proportionate share of the land on which the building stands. This right is unlimited in time and is the highest form of ownership recognized under Dubai law.

Parameter	Characteristics of Freehold Ownership
Time Limit	None (permanent ownership)
Subject of Ownership	Unit and land (including share in common parts)
Transferability	Sale, gift, exchange without time restrictions
Inheritance	Full possibility of bequest to heirs (by will or law)
Control	Maximum autonomy in management and modifications (within community rules)
Typical Document	Title Deed issued by the DLD

 

Freehold is the ideal choice for investors with a long-term horizon who wish to build generational wealth. However, our Prague-based attorneys point out that even with freehold properties, the owner is obliged to comply with the Master Community Declaration and pay service charges, the non-payment of which can lead to legal penalties.

Leasehold – Long-term Lease and Rights of Use

Leasehold represents the right to use a property for a fixed period, which in Dubai typically reaches up to 99 years. Unlike the freehold model, the investor does not own the land, which remains the property of the freeholder (often a state entity or a large developer).

• Duration: Contracts are concluded for a period of 10 to 99 years.
• Nature of Asset: This is a "depreciating asset," whose market value decreases as the end of the lease term approaches, unless it is extended for a fee.
• Restrictions: Changes to the structure of the property often require the explicit consent of the landowner.
• Inheritance: Heirs only take over the remaining years of the lease.

Leasehold may be attractive due to a lower purchase price, but it requires specific consideration of the return on investment over time. In this context, our attorneys in Prague recommend that clients thoroughly analyze their exit strategy, as the liquidity of leasehold properties may be limited in the later stages of the lease.

Usufruct and Musataha Rights

In addition to the two main models, Law No. 7 and the subsequent UAE Federal Civil Code recognize the real rights of usufruct and musataha.

• Usufruct (Right of Use and Enjoyment): Allows the holder to use another person's property and take its fruits (e.g., rent) for a period of up to 99 years.
• Musataha (Right to Build): A specific right to construct buildings on another person's land, which are owned by the musataha holder for the duration of the right (max. 50 years). This form is common for large commercial projects and industrial zones.

Geographical Scope and Designated Areas

A key supplement to Law No. 7 of 2006 is Regulation No. 3 of 2006, signed by Sheikh Mohammed bin Rashid Al Maktoum in June 2006. This regulation precisely listed the plots and areas where foreigners can acquire ownership rights. Without this definition, Law No. 7 would be essentially unenforceable for foreigners.

Original List of Areas under Regulation No. 3 of 2006

The regulation originally defined 23 locations that became the seed of the Dubai real estate boom. These included:

1. Umm Hurair 2 (Plot 013)
2. Al Barsha South 2 and 3 (Plot 002)
3. Emirates Hills 1, 2 and 3
4. Jebel Ali (including extensive industrial and residential plots)
5. Dubai Marina (Plots 007, 014, 015, 033)
6. Palm Jumeirah and Palm Jebel Ali (Plot 001)
7. The World Islands
8. Ras Al Khor (Plot 165)
9. Nad Al Sheba (selected plots)

Over the years, this list has expanded dramatically through further decrees and regulations. In 2026, the portfolio of freehold areas includes dozens of neighborhoods, from vertical business districts to sprawling residential suburbs. For international investors, it is critical to know that outside these zones, they cannot own freehold property as foreigners, which is confirmed by Dubai court rulings that have declared foreign transactions in "non-designated" areas null and void, even if supported by an arbitration award.

This aspect of Dubai law is absolutely essential for foreign investors as it touches upon the very essence of legal certainty. In this context, our legal team at ARROWS points to the concept of "Public Policy," which Dubai courts apply very strictly in real estate matters.

Here are the details regarding the mechanism for invalidating such transactions:

1. Legal Basis for Absolute Nullity

According to Article 4 of Law No. 7 of 2006, property ownership rights in Dubai are restricted exclusively to UAE and GCC nationals, unless the property is located in areas designated by the Ruler (Designated Areas). Article 26 of the same law then explicitly states that any agreement or disposition that violates these provisions is absolutely null and void. This nullity is not relative (meaning one of the parties would have to invoke it), but the court must take it into account ex officio, as it concerns the protection of state interests and public policy.

2. Why an Arbitration Award is Not Enough

In international trade, it is common for disputes to be resolved through arbitration (e.g., DIAC). However, in Dubai real estate law, there is a fundamental barrier:

• Inadmissibility of Conciliation: According to UAE procedural regulations, matters in which conciliation is not permissible cannot be decided in arbitration.
• Subject Matter Jurisdiction: The Dubai Court of Cassation (the highest judicial instance) has ruled in several landmark judgments (e.g., Judgments No. 43/2009 or 180/2011) that issues of real estate registration and compliance with ownership zones are a matter of public policy.
• Consequence: If an arbitrator attempts to rule on the validity of a contract in a "non-designated" area or orders the transfer of ownership in such a zone to a foreigner, the court will set aside such an arbitration award during the enforcement (ratification) attempt. The court argues that the arbitrator exceeded their authority because only state courts may decide on matters of public policy.

3. Dubai Court Rulings and Practical Impacts

Dubai Courts have repeatedly confirmed that the protection of the real estate register takes precedence over the contractual freedom of the parties:

• Cassation Appeals: In cases where an investor sought confirmation of ownership in an area not officially approved as freehold (e.g., through Oqood registration for off-plan projects), the courts ruled that the absence of registration with the Dubai Land Department (DLD) renders the Sale and Purchase Agreement (SPA) legally non-existent.
• Limitation of Damages: According to Article 10 of Law No. 7/2006, if a party breaches an obligation to transfer property, its liability is limited only to financial compensation (damages), not to the forced transfer of the property if such transfer contradicts legal limits for foreigners.

4. Risk of "Hidden" Agreements

Our Prague-based attorneys at ARROWS warn against attempts to circumvent the law through various trust agreements or side agreements, where property in a "prohibited" zone is formally registered to a local citizen but effectively controlled by a foreigner. In the event of a dispute, these agreements are invisible to the courts or serve as direct evidence of circumventing the law, leading to their immediate invalidation without any right to investment protection. For a secure investment, it is therefore essential to conduct legal due diligence to verify with the DLD whether the specific plot (Plot Number) is indeed registered as an area with full ownership rights for foreigners. Although the list of these areas is expanding, the boundaries between freehold and non-freehold zones are strictly defined, and crossing them means the loss of legal enforceability of the contract.

Market Analysis in Key Zones (As of 2026)

The Dubai market in 2026 shows a high degree of segmentation, with each area offering a different risk and return profile. According to ARROWS analysis and market data, the areas can be categorized as follows:

 

The Transaction Process and the Role of Institutions in Dubai

Property registration in Dubai is a process that has undergone massive digitalization in recent years. The DLD has introduced a system of "Real Estate Registration Trustee centers," which function as an extension of the authority and allow transfers to be processed in a matter of hours rather than days.

Step 1: Contractual Documentation and Deposit

The process begins with the signing of a preliminary purchase agreement, known in Dubai as a Memorandum of Understanding (MoU) or Contract F. At this stage, the buyer pays a reservation deposit, usually 10% of the purchase price, which is held by an authorized intermediary. Our Prague-based attorneys at ARROWS strongly warn against signing any forms without a prior legal review, as even these "preliminary" documents are legally enforceable in Dubai and contain strict penalties for withdrawal.

Step 2: No Objection Certificate (NOC)

Before the transfer, the seller must obtain a certificate from the developer confirming that there are no outstanding debts on service charges (NOC). Without this certificate, the DLD will not proceed with the transfer.

• Processing time: 1 to 5 working days.
• Fee: 500 to 5,000 AED (depending on the developer).

Step 3: Registration with the DLD

The transfer itself takes place in the presence of both parties (or their representatives based on an authenticated power of attorney) at a registration center.

• Required documents: Original passports, Title Deed, NOC, manager's checks for the purchase price and DLD fees.
• Outcome: Immediate issuance of a new Title Deed (in both paper and digital form via the Dubai REST app).

Specifics of Off-plan Projects (Properties Under Construction)

For projects still in the construction phase, a Title Deed is not used; instead, an Oqood (Initial Sale Registration Certificate) is issued. Law No. 13 of 2008, which supplements the framework of Law No. 7, requires all off-plan sales to be registered in the Interim Real Property Register. This registration is crucial for buyer protection, as it confirms their claim to the future unit and prevents the developer from selling the same apartment twice.

According to the experts at ARROWS, it is absolutely essential for off-plan projects to verify compliance with the "Escrow Law" (Law No. 8 of 2007). All buyer payments must be directed to an escrow account managed by a bank and supervised by RERA (Real Estate Regulatory Authority). The developer can only draw these funds based on documented construction progress, which dramatically reduces the risk of misappropriation of funds.

Financial Aspects and Fee Structure in 2026

The Dubai market is renowned for its tax efficiency; however, transaction costs are significant and must be included in the investment calculation.

Overview of Acquisition Costs

 

Ongoing Costs: Service Fees and the Mollak System

Property ownership in Dubai generates annual maintenance costs for common areas of buildings and community infrastructure. These fees are managed through the Mollak system, operated by RERA. The system ensures transparency by allowing owners to see how their money is being used, and invoices are received directly from the DLD portal.

Service charges vary significantly depending on the location and level of luxury:

• Highest: Burj Khalifa (approx. 72 AED/sq. ft).
• Premium: Palm Jumeirah and Downtown (17–40 AED/sq. ft).
• Mid-segment: Dubai Marina and Business Bay (13–28 AED/sq. ft).
• Affordable: International City and Discovery Gardens (7–12 AED/sq. ft).

According to our attorneys at ARROWS, monitoring service charge levels is critical for calculating net return on investment (Net ROI) for investment properties. High fees can significantly reduce rental profitability, even if the gross rent is attractive.

Investor Rights Protection and Dispute Resolution Mechanisms

The robustness of Law No. 7 of 2006 and its subsequent regulations is particularly evident in crisis situations. Dubai has developed a sophisticated system of institutions that protect the interests of owners.

Rental Dispute Settlement Centre (RDSC)

A specialized court, the RDSC, was established for disputes between landlords and tenants. Dubai rental law (Law No. 26 of 2007) is heavily oriented towards tenant protection, particularly regarding rent increases, which are limited by the RERA index. An owner may only increase the rent if the current price is more than 10% below the market average according to the official index, and must inform the tenant at least 90 days before the end of the contract.

Dubai Property Court

Property rights, ownership disputes, boundary issues, and breaches of purchase agreements fall under the jurisdiction of the Property Court, a specialized section of the Dubai civil courts. These courts have exclusive jurisdiction to decide on real estate located within the emirate, including freehold zones.

Special Tribunal for Unfinished and Cancelled Projects

One of the most progressive protection tools is the "Special Tribunal to Settle Disputes Related to Unfinished and Cancelled Real Property Projects," strengthened by Decree No. 33 of 2020. This tribunal has the authority to:

• Liquidate projects that RERA has definitively cancelled.
• Determine the rights and obligations of developers and buyers in unfinished projects.
• Order the return of funds from escrow accounts directly to buyers.
• Appoint auditors to verify the financial position of problematic projects.
• According to ARROWS, this mechanism is fundamental for the confidence of international investors, as it provides assurance that even in the event of developer failure, there is a clear path to recovering at least part of the invested funds.

Holding Structures in Dubai and Tax Implications

For more sophisticated investors or entities managing larger portfolios, the question of the optimal form of property holding arises. Law No. 7 allows property ownership by legal entities, though with certain specific requirements.

Ownership through Companies

While individuals can purchase real estate directly in their own name (requiring only a valid passport), the situation for companies is more complex. Foreigners can own real estate in Dubai through firms registered in specific free zones, such as the Jebel Ali Free Zone (JAFZA), Dubai Multi Commodities Centre (DMCC), or Abu Dhabi Global Market (ADGM).

• Advantages: Better asset management, easier transfer of shares (instead of direct property sale), privacy protection, and the ability to bypass Sharia inheritance rules that might otherwise apply to an individual's assets.
• Disadvantages: Higher initial setup costs and annual company maintenance fees, and the requirement for specific approvals from the DLD to register property under a corporate entity.

The Tax Environment in Dubai in 2026

Dubai maintains its status as a tax haven for individual investors, but the environment is evolving.

1. Personal Taxes: There is no personal income tax, capital gains tax, or inheritance tax. This aligns with what is often seen on social media. However, experienced investors know that concepts like "residency," "tax domicile," and other factors must be considered.
2. VAT: The sale of residential real estate is "zero-rated" for VAT on the first supply (within 3 years of completion); subsequent sales are exempt. For commercial real estate, a standard rate of 5% applies.
3. Corporate Tax: Since 2023, the UAE has introduced a federal corporate tax of 9%. Crucially for real estate investors, income from property held by individuals for personal investment purposes remains outside the scope of this tax. However, if the property is held by a company, rental income may be subject to taxation.

In this context, our Prague-based attorneys recommend that clients establish an "asset holding structure" that is tax-efficient both in the UAE and in the investor's country of tax residence (e.g., in the Czech Republic) to avoid undesirable tax consequences when repatriating profits.

Strategic Advisory from ARROWS for Czech Investors Abroad

The law firm ARROWS, thanks to its presence in Prague and international partnerships, identifies specific challenges faced by investors from Central Europe when entering the Dubai market.

Risks of "Quick Purchases"

A common mistake is succumbing to aggressive marketing without a thorough review of documentation. ARROWS points out that real estate agents in Dubai are often not legally qualified to analyze a Sale and Purchase Agreement (SPA) or to verify a project's status with RERA. A legal audit (due diligence) should include:

• Verification of the seller's Title Deed validity.
• Checking the project registration and the status of the developer's escrow account.
• Analysis of hidden fees and restrictions in the Master Community Declaration.

Exit Strategy and Inheritance

Many investors forget what happens to the property in the event of their death. Although Law No. 7 grants the right of legacy, the inheritance process for non-residents can be lengthy and costly if there is no legal will registered with the Dubai courts or the DIFC Wills Service Centre. Without a will, local courts may apply principles of Islamic law, which can lead to an unintended distribution of assets among a wide range of relatives. Therefore, ARROWS standardly recommends registering a will as an integral part of the purchase process.

Financing and Non-Resident Mortgages

Foreigners can utilize bank financing in Dubai, although conditions differ from those for residents.

• LTV (Loan-to-Value): For non-residents, financing is typically available up to 50–60% of the property value.
• Costs: In addition to interest, it is necessary to account for a 0.25% DLD fee for mortgage registration and the costs of property valuation by the bank (approx. 2,500 – 3,500 AED).

The Future of the Real Estate Market and Legislation in Dubai

Looking ahead to 2026 and beyond shows that Dubai is not resting on its laurels. The ambitious Dubai 2040 Urban Master Plan anticipates a doubling of the population and massive investment in green infrastructure and sustainability. The legislative framework is adapting by introducing new standards, such as the Jointly Owned Real Property Law (Law No. 6 of 2019), which gives building owners greater control over management through Owners Committees.

Another trend is the integration of technologies like blockchain into the DLD registry, which could lead to instant and fully automated transfers in the future without the need for physical presence. This would further strengthen confidence in the system, the foundations of which were laid by Law No. 7 of 2006.

Final Summary and Recommendations

Law No. 7 of 2006 regarding real estate registration in the Emirate of Dubai is not just a historical document, but a living foundation that defines the reality of today's market. For anyone considering property ownership in this Emirate, understanding its principles is critical.

Key takeaways for investors:

1. Registration is everything: Without registration with the DLD, you do not hold legal title, only a paper promise. Always insist on immediate registration.
2. Freehold vs. Leasehold: The difference lies not only in price but in the legal nature and long-term value. Choose freehold in designated zones for maximum legal protection.
3. Verify developers: For off-plan purchases, your primary protection is the Escrow account and Oqood registration. Never send funds outside official channels controlled by RERA.
4. Do not underestimate service charges: These can amount to 20–30% of your gross rental income. Verify them in the Mollak system before proceeding with a purchase.
5. Secure your inheritance: Registering a will in Dubai is just as critical as the Title Deed itself.

From the perspective of our Prague-based law firm ARROWS, Dubai is a market of immense opportunity, but also one that does not forgive ignorance of the rules. Law No. 7 of 2006 established a secure environment, but it is up to every investor to play by the rules with professional support to eliminate hidden risks. The Dubai real estate market in 2026 is mature, transparent, and institutionally strong, making it one of the premier destinations for global portfolio diversification.

Does Dubai seem safe to you? Austria seemed safe to our clients as well, who rented out apartments in Maria Alm for years before discovering that rentals were prohibited there (at least in certain areas...). Our Czech legal team often sees how local regulations can surprise international investors.

 

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