Real Estate Considerations for Expats in Dubai · 2019-02-07 · o Real estate prices are expected to continue to decrease as supply exceeds demand. o However, a gradual recovery

Real Estate Considerations for Expats in Dubai

Shahram SafaiPartner

Afridi & Angell4 February 2019

• Founded in 1975, Afridi & Angell is a full-service UAE law firm in its fifth decade at the forefront of the legal community.

• Licensed in the three largest Emirates of Abu Dhabi, Dubai and Sharjah as well as the Dubai International Financial Centre, our practice areas include banking and finance; corporate and commercial law; arbitration and litigation; construction; real estate; infrastructure projects; energy; project finance; maritime (wet and dry); and employment.

• We advise local, regional and global clients ranging in size and sophistication from start-ups, sole proprietorships, family-owned businesses, entrepreneurs and investors to some of the world’s largest public and private companies, governments and quasi-government institutions.

• Afridi & Angell is the exclusive member firm in the UAE of top legal networks and associations, most notably Lex Mundi, the world’s leading network of independent law firms, and World Services Group.

4 February 2019 Real Estate Considerations for Expats in Dubai 2

About Afridi & Angell

Outlook for Dubai Real Estate Market

• Prices & trends:

o Rental prices have decreased.

o Transactional activity is expected to remain depressed.

o Real estate prices are expected to continue to decrease as supply exceeds demand.

o However, a gradual recovery is expected as we move beyond 2020 Dubai World Expo.

3Real Estate Considerations for Expats in Dubai4 February 2019

IMF forecasts

• UAE's economic growth will increase to 4.4% in 2018:

o this is the fastest growth rate in the gulf region; and

o driven by local spending, government investment for Expo 2020, and a pick-up in

global trade.

Outlook for Dubai Real Estate Market (cont’d)

44 February 2019 Real Estate Considerations for Expats in Dubai

IMF forecasts (cont’d)

• In contrast, the expected growth rates for the major economies are:



Population growth forecasts

• Dubai’s current population - approximately 2,749,000.

• Dubai is one of the fastest growing cities in the world – population growth rate of 1,000% in

just 40 years.

• An average of 3,500 housing units must be built per year to keep up with population

growth – Dubai Municipality 2017 study.

• Dubai Municipality population forecast:

o 3.3 million people by 2021.

o 5.2 million people by 2030.



Dubai: Real Estate Law Overview


Law 7 of 2006: The Property Registration Law

• Property rights that must be registered are discussed in Article 9:

“All dispositions that may create, transfer, vary or terminate a Real Property Right and all final judgements confirming any such dispositions shall be registered in the Real Property Register. Such dispositions shall not be valid unless they are registered in the Real Property Register.”

• Foreigners are permitted to own freehold and 99 year leasehold ownership of land, villas,apartments, offices and other property in designated areas. GCC nationals may ownanywhere.

• The designated areas include some of the most desirable areas in Dubai such as JLT, DubaiMarina, Jumeirah Islands, The Palm, Downtown Dubai and Emirates Hills.

• Mortgages can be obtained by a property owner and registered against title at the DubaiLand Department.

• DLD Form F – Real Estate Contract to register all property rights as mentioned in the law.


Dubai: Real Estate Law Overview (cont’d)

Additional Legal Changes

• Dubai Government has since then introduced a number of laws to further protect property owners and purchasers:

o Law 27 of 2007 The Jointly Owned Property Law

o Law 8 of 2007 The Trust (Escrow) Account Law

o Law 13 of 2008 The Interim Property Registration Law

o Law 26 of 2007 The Landlord & Tenant Law

o Regulation 85 of 2006 This regulation requires real estate brokers to be registered on the Real Estate Brokers Register

• These changes have had a lasting impact and enabled property transactions to be conducted with more legal certainty.


Sheikh Zayed Road in 1991


Sheikh Zayed Road in 2018


Sheikh Zayed Road in 2025?



Law 27 of 2007: The Jointly Owned Property Law

• Law 27 of 2007 was designated for transferring control and ownership of common areas inapartments and offices to owners (JOP Law).

• Once the owners’ association has been formed, the developer must hand over managementof the common areas to the association. The handover procedure is detailed in the JOPLaw.

• The owners’ association may impose financial and non-financial penalties to assist in therecovery of service charges.



Law 8 of 2007: The Trust (Escrow) Account Law

• Law 8 of 2007 on regulating accounts for real estate development was issued to regulatedevelopers and safeguard purchasers’ money in respect of off-plan property purchases.

• All monies payable to a developer selling units off-plan must be deposited in an escrowaccount at an approved bank, and monitored by the Government of Dubai’s Real EstateRegulatory Agency (RERA).

• RERA will generally allow construction costs (contractors’, subcontractors’ and consultants’costs) to be withdrawn from the escrow account upon verification and approval by theLand Department.


Law 13 of 2008: The Interim Property Registration Law

• Law 13 of 2008 was introduced to provide further rights and protections to purchasers buying off-plan units (it was changed in sections by Law 9 of 2009, Decree 6 of 2010 and Law 19 of 2017).

• All purchases of off-plan property units are required to be registered in the interim property register.

• Purchasers may sell and mortgage property that has been registered in the interim property register.

• However, the law also provides that purchasers are at risk of being financially penalised and their purchase contract terminated if they fail to pay for the off-plan unit.

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Law 26 of 2007 (as amended by Law 33 of 2008): The Landlord & Tenant Law

• Law 26 of 2007 (as amended by Law 33 of 2008) governs the rights of landlords andtenants.

• A landlord may demand eviction of the tenant prior to expiry of the tenancy period incertain instances, such as if the tenant fails to pay rent.

• A landlord may demand eviction of a tenant upon expiry of a tenancy contract in thefollowing instances:

▪ if the owner wishes to demolish the property for reconstruction or to add newconstructions;

▪ if the property requires renovation or comprehensive maintenance which cannot be executedwhile the tenant is occupying the property;

▪ if the owner wishes to use the property for his own or his immediate family member’s use(and he proves that he does not own a suitable alternative property for that purpose); or

▪ if the owner of the property wishes to sell the property.

• The landlord must notify the tenant with reasons for eviction at least 12 months

prior to the determined date of eviction.

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Residency Developments in Dubai -Impacting Expats

Cabinet Decision 56 of 2018 On the Regulation of Residence Permits for Investors,Entrepreneurs and Individuals with Specialized Talents

• UAE will offer long term residency permits to the following categories:o Investorso Entrepreneurso Individuals with specialized talents and researchers in various fields of science and

knowledgeo Honor students with promising scientific potential

Dubai - Residency Developments


Investor Permits – Real Estate

• A 5 year residency permit for Real Estate Investors if all of the following conditions are met:

“Article 2 - Granting a residence permit to an investor in a real-estate property requires that the investment in one or more properties covers a total property value of no less than AED 5 million.”

“Article 3- In addition to the above conditions, the following conditions shall be met: a- The amount invested shall be wholly owned by the Investor and not a loan and, and the Investor shall provide a proof of that.b- The investment shall be kept for a period of 3 years at least from the date of issuance of the residence permit.c- The Investor shall not be financially liable for any claims or civil judgments which reduce his/her financial solvency that shall not be below AED 10 million.d- The Investor shall submit a comprehensive health insurance policy covering him/her and his/her family members for the duration of his/her stay in the State.”

Dubai - Residency Developments (cont’d)


Investor Permits – Public Investments

• A 10 year residency permit for Investors in Public Investments if all of the following conditions are met:

“Article 4(1) - Granting a residence permit to an Investor in public investments requires satisfying one of the following conditions: (a) the Investor shall have a deposit of no less than AED 10 million in an investment fund within the State; or (b) the Investor shall establish a company in the State with a capital of no less than AED 10 million or be a partner in an existing or new company with a financial share of no less than AED 10 million; or (c) the Investor shall have investments in the State with a total value of no less than AED 10 million (provided that investment in non-real estate properties covers no less than 60% of the total investments).”

“Article 3- In addition to the above conditions, the following conditions shall be met: a- The amount invested shall be wholly owned by the Investor and not a loan and, and the Investor shall provide a proof of that.b- The investment shall be kept for a period of 3 years at least from the date of issuance of the residence permit.c- The Investor shall not be financially liable for any claims or civil judgments which reduce his/her financial solvency that shall not be below AED 10 million.d- The Investor shall submit a comprehensive health insurance policy covering him/her and his/her family members for the duration of his/her stay in the State.”




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Entrepreneur Permits

• A 5 year renewable residency permit for Entrepreneurs if all of the following conditions are met:

“Article 6(a) 1- the Entrepreneur shall own a former successful project with a minimum value of AED 500 thousand minimum, in an approved area as accepted by the Committee;

2- He/she shall have obtained the approval of a business incubator accredited in the State by the Authority to establish the proposed activity in the State;

3- He/she shall provide a comprehensive health insurance policy for him/her and his/her family members for the duration of his/her stay in the State.”



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Specialized Talents Permits

• A 10 year renewable residency permit for the following persons subject to certain conditions set out in Article 8:

“1 – Medical doctors and specialists

2 – Scientists

3 – Creative individuals in the field of culture and art

4 – Inventors

5 – Elite individuals

6 – Executive directors

7 – Specialists in educational areas of priority.”



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Honor Student Permits

• A 5 year renewable residency permit for honor students (and their families) if all of the following conditions are met:

“Article 9 - 1- The student shall have got a grade of excellence or at least 95% in the General Certificate of Secondary Education or its equivalent, provided that the certificate is approved by the competent authority in the State.

2- The student shall be enrolled in any of the accredited universities in the State, and his/her GPA shall not be less than (3.75) or equivalent, in any scientific specialties determined by the Authority in coordination with the Competent Authority.

3- He/she shall have obtained the approval of the Competent Committee.

4- He/she shall submit a proof of registration at a university or institute accredited in the State.

5- He/she shall provide a comprehensive health insurance policy for him/her and his/her family members throughout the period of his/her stay in the State.”


5 Year Retirement Visas

• Newspapers reported that UAE will soon offer retirement visas of up to 5 years for persons

over 55 years old if they have:

o AED 2 million in property; or

o AED 1 million in savings; or

o Active income of AED 20,000 per month.

• Result of a UAE cabinet decision – however, awaiting exact details of the new system.

• Impact on property market:

o Hope many expats will buy a home and retire in Dubai.



Canada – Real Estate Law Overview

4 February 2019

Outlook for Canadian Real Estate Market

Real Estate Considerations for Expats in Dubai 26

• Toronto and Vancouver continue to lead all Canadian cities in terms of real estate investment prospects.

• Toronto:

o Net immigration into Toronto has hit a 15-year high which has led to strong demand for housing.

o The local construction sector is on track to record its 10th straight year of growth in 2019, with GDP growth forecast to reach 2.3% in 2019.

o However, the market is at risk of cooling due to:

▪ rising interest rates;

▪ high consumer debt; and

▪ continued impact of the 15% non-resident speculation tax on foreign buyers of residential property in Toronto and surrounding areas (NRST).


4 February 2019

Outlook for Canadian Real Estate Market


• Vancouver:

o Vancouver’s economy is forecast to grow 2.3% in 2019 after seeing 2.9% growth in 2018.

o However, the market is at risk of cooling due to:

▪ rising interest rates;

▪ tougher stress tests on residential mortgages imposed by the Office of the Superintendent of Financial Institutions;

▪ continued impact of:

– increased foreign-buyers’ tax from 15% to 20%;

– the City of Vancouver’s empty homes annual tax of 1% of a vacant property’s assessed taxable value;

– speculation annual tax of 0.5% to 2% of a vacant property’s assessed taxable value; and

– increased property tax rates for homes assessed above $3million.


4 February 2019

National Statistics – Canadian Real Estate Association


4 February 2019

National Statistics – Canadian Real Estate Association (cont’d)


4 February 2019

Canada: Real Estate Law Overview

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• In Canada, laws relating to real estate are dealt with at a provincial rather than federal level:

o For example, in British Columbia:

▪ Property Law Act - requires that the vendor of land must deliver a registered title (ie an instrument that can be registered under the Land Title Act).

▪ Land Title Act – sets out how the land titles offices work, the registrars powers, how to register an interest in land.

• Generally, the real estate laws across the provinces are similar and based on the common law with the exception of Quebec.

• All transfers of real estate in Canada must be registered. Each province administers its own system of registration.

• Title insurance is commonly used by purchasers of real estate in Canada, and many mortgagees require borrowers to obtain it.


4 February 2019

Canada: Real Estate Law Overview (cont’d)

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• Registered ownership of real estate is effected by the registration of a transfer or deed.

• Information on the certificate of title includes:

o the name of the registered owner;

o the legal description of the property; and

o interests or notices of interests in land specific to the land parcel held by third parties.



4 February 2019

Canada: Restrictions on Foreign Ownership of Real Estate

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• Generally, non-residents are capable of acquiring, holding and disposing of real estate in Canada. However, there are a few restrictions to consider:

• Federal restrictions:

o The Competition Act and the Investment Canada Act provide for notification to, or review by, the federal government in certain circumstances involving acquisitions of real estate by non-resident purchasers.

o The Citizenship Act also permits each province and territory to enact laws restricting ownership of real estate by non-residents.

• Provincial restrictions:

o Currently, the provinces have not imposed material restrictions on the acquisition of urban real estate by non-residents.

o However, most provinces have acted to preserve farm or non-urban land, for example:▪ by limiting the amount of farmland that can be owned by non-residents; or ▪ requiring that the acquisition of farmland by non-residents be approved by the relevant

agricultural commission, subject to certain exemptions.

o Instead, the provinces have imposed various non-resident taxes to curb ownership of real estate by non-residents.


4 February 2019

Canada: Real Estate Tax

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Foreign seller taxes (Federal):

• Section 116 of the Income Tax Act imposes tax liability upon a non-resident seller of real estate.

• In very general terms, a buyer acquiring real estate from a non-resident is required to remit a portion of the purchase price (typically 25%, but in some cases 50%) to the Canada Revenue Agency in respect of the non-resident seller’s Canadian tax liability unless certain conditions apply.



4 February 2019

Canada: Real Estate Tax

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• Land Transfer taxes:

o Provincial : All transfers of real estate are subject to land transfer tax which is imposed at the provincial level (2% - 5% for Ontario; 1% - 3.5% for British Columbia).

o Municipal : However, in some provinces, the municipalities also levy a land transfer tax in addition to the tax levied by the province.

o In most jurisdictions, the buyer is liable for paying the land transfer tax.

• Non-resident speculation taxes (Provincial) : British Columbia and Ontario impose additional taxes of 20% and 15%, respectively, on the transfer of certain residential properties in certain urban areas to foreign nationals, foreign corporations or trustees for a beneficial owner that is a foreign national or foreign corporation.


4 February 2019

Canada: Real Estate Tax (cont’d)

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• Vacancy tax (Provincial) : On 27 November 2018 British Columbia assented to a new Speculation and Vacancy Tax Act, which imposes an annual tax of 0.5% to 2% of the home’s assessed value on a vacant home unless it is rented for at least 6 months (3 months for 2018). The speculation and vacancy tax is distinct from the empty homes tax in the City of Vancouver.

• Empty homes tax (Municipal) : On 30 October 2018 the City of Vancouver passed Vacancy Tax By-Law No. 11674, which imposes an annual tax of 1% of the home’s assessed value on a vacant home unless it is rented for at least 6 months.


4 February 2019

Non-Resident Speculation Tax (NRST) of Ontario


• On 21 April 2017, the Ontario government introduced a “non-resident speculation tax” (NRST) of 15% of the value of the consideration paid for the transfer of certain residential real estate in the Greater Golden Horseshoe Region, if that land is transferred to a “foreign entity” or a “taxable trustee” pursuant to Article 2.1 of Land Transfer Tax Act.

“Article 2.1 Land Transfer Tax Act Additional tax on foreign entities and taxable trustees(2.1) In addition to any tax payable under subsection (1), and subject to section 2.1, every person who, on or after April 21, 2017, tenders for registration in Ontario a conveyance by which any designated land that is located within the specified region is conveyed to a foreign entity or a taxable trustee shall pay, when the conveyance is tendered for registration or before it is tendered for registration, a tax,(a) computed at the rate of 15 per cent of the value of the consideration for the conveyance; or(b) if an alternate rate of tax is prescribed by the Minister for the purposes of this subsection, computed by multiplying the prescribed alternate rate by the value of the consideration for the conveyance. 2017, c. 17, Sched. 1, s. 2.”

https://www.canlii.org/en/on/laws/stat/rso-1990-c-l6/latest/rso-1990-c-l6.html?searchUrlHash=AAAAAQAlRm9yZWlnbiBFbnRpdGllcyBhbmQgVGF4YWJsZSBUcnVzdGVlcwAAAAAB&resultIndex=1#sec2.1_smooth

https://www.canlii.org/en/on/laws/stat/rso-1990-c-l6/latest/rso-1990-c-l6.html?searchUrlHash=AAAAAQAlRm9yZWlnbiBFbnRpdGllcyBhbmQgVGF4YWJsZSBUcnVzdGVlcwAAAAAB&resultIndex=1#sec2_smooth

4 February 2019

Non-Resident Speculation Tax (NRST) of Ontario (cont’d)


• A “foreign entity” includes foreign nationals (i.e. natural persons who are not Canadian citizens nor permanent residents) and foreign corporations.

• A “taxable trustee” is a trustee that is itself a foreign entity or that acts as a trustee for a foreign entity.

• The Greater Golden Horseshoe Region covers a significant area of Ontario, including Toronto, Hamilton, Barrie, Brant, Brantford, Dufferin, Guelph, Haldimand County, Regional Municipality of Halton, Kawartha Lakes, Regional Municipality of Niagara, Northumberland, Orillia, Regional Municipality of Peel.

• The tax only applies to transfers of “designated land” within the Greater Golden Horseshoe Region – the land must contain at least one and not more than 6 family residences.

• The tax does not apply to land with more than six single family residences, agricultural land, commercial land or industrial land within the Greater Golden Horseshoe Region.

• The tax is payable in addition to provincial and municipal Land Transfer Taxes.

4 February 2019

Non-Resident Speculation Tax (NRST) of Ontario (cont’d)


• Exemptions are available to:

o a foreign national who receives confirmation as a nominee by the Ontario Immigration Nominee Program;

o a foreign national who has protected persons status (refugees); and

o a foreign national who jointly purchases a residential property with their spouse who is a Canadian citizen, permanent resident, a nominee or a protected person.

• Rebates are available to:

o foreign nationals who become permanent residents of Canada within four years of acquiring the property;

o international students from “approved institutes” who are enrolled in “two continuous years” of program; and

o foreign nationals working full time in Ontario for one continuous year after acquiring the property,

subject to the property being the principal place of residence.

• Penalty - Tax Evasion:

o Provisions to audit properties for tax evasion

o Failure to pay NRST attracts fines and/or imprisonment


4 February 2019

Speculation and Vacancy Tax Act - British Columbia


• On 27 November 2018 a new Speculation and Vacancy Tax Act was assented to by British Columbia. Note, the Speculation and Vacancy Tax is distinct from the empty homes tax in the City of Vancouver.

• Under the Speculation and Vacancy Tax Act :

o All owners of vacant residential property located within B.C.’s major urban centers, regardless of residency or citizenship, will pay an annual tax at a rate of 0.5% for the 2018 calendar year.

o Beginning in 2019, the tax rate on vacant property is 0.5% for B.C. residents and Canadian citizens or permanent residents. Foreign owners and members of satellite families (which includes Canadian citizens who are not resident in British Columbia) pay an annual 2% tax rate.

o The tax is calculated as a proportion of the assessed value of the property which can be calculated online at https://www.bcassessment.ca/

• “Vacant” means the residential property has been left vacant for six months or more within a calendar year.

• The tax applies to vacant residential property located within B.C.’s major urban centers –including Metro Vancouver, the Capital Regional District, Kelowna, West Kelowna, Nanaimo-Lantzville, Abbotsford, Chilliwack and Mission.

https://www.bcassessment.ca/

4 February 2019

Speculation and Vacancy Tax Act - British Columbia (cont’d)


• Exemptions:

o There are a number of exemptions and the most common are:

▪ The principal residence exemption.

▪ The property was rented out to a tenant under a long-term rental.

▪ The property was under construction or renovation.

▪ The property was acquired within the year.


Questions?

Documents

Real Estate Considerations for Expats in Dubai · 2019-02-07 · o Real estate prices are expected to continue to decrease as supply exceeds demand. o However, a gradual recovery