Property is a vital sector of Dubai’s economy that has been performing well. In June 2022, the Dubai real estate market recorded AED 22.7 billion sales – highest sales figures in the last 13 years – and reaching almost 71 percent of the total 2021 sales volume, according to Dubai Land Development (DLD) data revealed.
Recently Dubai Decree No. 22 of 2022 (the “Decree”) is issued by the Ruler of Dubai, introduces incentives for property investment funds (“Property Funds”) in the Emirate of Dubai. The Decree goes into effect from the date of its publication in the official gazette (i.e. 22 July 2022).
New law will support the growth of real estate investment funds in the emirate and encourage real estate funds and institutional investors to enter the market and provide greater regulation and transparency.
WHAT IS A REAL ESTATE FUND?
A real estate investment fund is a type of mutual fund that invests in securities offered by public property companies, including real estate investment trusts (Reits), according to Investopedia.com.
While Reits pay out regular dividends, the investment funds provide value through appreciation, Investopedia says. Like regular mutual funds, real estate funds can be either actively or passively managed
Private real estate investment funds are professionally managed funds that invest directly in properties. These are available only to accredited, high-net-worth investors and typically require a large minimum investment, Investopedia.com said.
THE NEW DECREE TARGETS:
- All investment funds licensed and regulated by competent government authorities and includes Property Funds licensed in the Dubai International Financial Centre.
- Any real property located in the Emirate of Dubai, including the free zones and designated areas, but excluding any properties located in the Dubai International Financial Centre.
KEY POINTS OF THE DECREE:
- a “Register of Property Investment Funds” will be maintained by the Dubai Land Department pursuant to the Decree.
- The Property Funds listed in the register will be entitled to benefits and privileges specified in the Decree.
- In order to be eligible to be on the register the Property Funds net value should be no less than AED 180 million.
- The minimum investment value of target properties should be no less than AED 50 million.
- The Decree also stipulates the establishment of a “Committee for Property Investments Funds” whose purpose will be to identify areas and the type of properties which the Property Funds would be allowed to invest in either through full ownership (in designated areas of Dubai) or leasehold for a period not exceeding 99 years (outside the designated areas).
- The Decree authorises the Chairman of Dubai Executive Council to amend the incentives or declare additional incentives for the Property Funds.
- The Decree similarly authorizes the Chairman of Dubai International Financial Centre to amend or increase the incentives for the Property Funds.
- To ensure transparency in valuation of assets owned by real estate investment funds, the new law has also mandated the Land Department to appoint an independent appraiser approved by the Real Estate Regulatory Agency.
Alia Noor (FCMA, CIMA, MBA, GCC VAT Comp Dip, Oxford fintech programme, COSO Framework)Associate Partner
Ahmad Alagbari Chartered Accountants