About three years after the abolition of the so-called "property visa" in Dubai and other Emirates in the U.A.E., there is discussion about its re-introduction. This time, however, the planned property visa is said to be mandated by the federal immigration law and, as such, apply across all of the U.A.E. In particular, in June of 2011, it was announced that the U.A.E. Cabinet had approved extending the investor visa given to expatriates investing in the real estate sector in the U.A.E. to three years. Six months later, the new visa rule has not yet been implemented. More importantly, the exact parameters of its application are still subject for speculation. Specifically, it is unclear whether the new rule will merely extend the length of the property visa from its current six-month term to three years or whether it will introduce additional rights and protections beyond those provided for by the current rule.
What is clear is that, for the time being, real estate investors in the U.A.E. can avail themselves only of the existing six-month visa rule introduced two years ago. That visa rule, however, exists only in practice and not in a codified form, thereby leaving investors to rely on the verbal representations of the respective immigration officials as to its scope and requirements. Because of that, this visa rule is also unclear and is seemingly changing from time to time. That being said, certain guidelines have taken shape.
Most importantly, the current six-month visa is not a residence visa, but rather an entry permit, applying only to immediate family members. This presents significant inconveniences to investors either owning or wanting to purchase property in the country. Without a residence visa, investors cannot, for example, open a bank account, own a car, register a car, qualify for a U.A.E. driving license, send children to school, sponsor domestic help and open up utilities accounts. This, in turn, creates a series of ironic dichotomies. An investor can own, for example, a villa on the Palm Jumeirah, but cannot own a car to park in the garage of his villa. He can own a villa, but not be allowed to open accounts with utility service providers (e.g. electricity, water, phone, etc) to connect the villa. He can sponsor his family, including children, but not nannies, drivers, chefs and other domestic staff to help him take care of his family and to help him manage that villa.
Another requirement of the current visa rule is that the property is valued at over one million Dirhams. At the moment, it appears that the value of the property is determined by the contract price and not its market value, which in many cases is significantly lower than the contract price. Concerns have been voiced, however, as to whether this may change in favor of the market price, therefore disqualifying many properties.
Other qualification requirements, at least as previously stated, include a monthly income of ten thousand Dirhams and a medical insurance, though it is unclear whether they may be raised depending on the number of family members sponsored. Similarly, it is unclear whether the property must be completed to qualify and whether only certain real estate projects qualify.
With respects to the documents required to be submitted as part of the application process, they include six months of bank statements, either in local currency, US dollars or Euros; sales and purchase agreement; title deed; no-objection certificate from the developer; and passport. While reportedly visas can be issued the same day, certain restrictions and delays may exist for some nationalities.
The current visa rule, therefore, differs greatly from its predecessor. The previous property visa, in addition to the three-year term, granted residence status, with all of the accompanying rights and benefits. That practice, however, was only applicable in certain Emirates, such as Dubai, Ras Al Khaimah and Ajman, and was not, in fact, a law at all. Rather, it was a special arrangement that was established in those Emirates between their master developers and respective immigration authorities. Purchasers of real properties in certain projects were granted three-year residence visas to the U.A.E. specifically on the basis of their property ownership. Most of the sales and purchase agreements, which provided for issuance of such property visas, expressly stated that the validity of the property visa was subject to the prevailing laws and, as such, was not guaranteed. Therefore, when in 2008, the U.A.E. made a decision in favour of a uniform federal immigration policy, the repeal of the property visa practice was quick to follow.
The abolition of such property visa, however, left many investors, who had relied on it in buying their real estate, in a confusing state. This concerns especially those investors who had purchased homes in Dubai as their secondary or vacation homes. As such, they do not reside in Dubai and therefore do not qualify for any other type of visa. All of a sudden they found themselves, for example, unable to renew registration for their cars, which for the last several years they had bought and kept legally in their villas. Unable to find any other viable options, many such investors are registering cars on the name of their friends. Such solutions, however, are not workable over a long period of time.
Maybe it is such examples that were also the reasons behind Dubai's announcement last year that it was exploring new avenues to offer residence visas linked to property ownership, bearing in mind that immigration remains the domain of the federal government. Specifically, Dubai was considering an introduction of a business visa related solely to ownership of real estate. Such visa would not be governed by the immigration law, which is subject to the U.A.E. federal regulation, but rather companies' law, regulation of which is largely reserved for the individual Emirates.
The new visa would thus be based on the formation of a free-zone company in Dubai, the sole purpose of which is to own property. The company would be one hundred percent owned by the investor and would be the registered owner of the property. The company will have the legal basis to issue visas to the company's shareholders, much as any other U.A.E. company issues visas to its employees. The visa would remain valid as long as the company exists. In order for new visa scheme to have the desired effect of bringing investors back to Dubai, the costs and procedures for setting up such companies must be significantly less expensive and cumbersome from those that exist today.
Be it as it may, whether the property visa is based on the federal immigration laws or individual Emirate's company laws, it is clear that there are significant concerns and issues that should be factored in to make it effective. After all, the very objective of such visa is to protect foreign investors and to attract new investment. If done correctly, new regulations will undoubtedly bring many new investors back into the country. Despite the crisis and its associated pains, the U.A.E. remains a very desirable destination for a large part of the world's population. Investors want to not only invest hard cash, but they also want to raise their families here. Many want to use it as a base for their businesses worldwide. Or they just want to have a vacation home to retreat to. To deny them the opportunity to bring foreign investment into the country would have the effect of reversing the good fortunes of the success which the U.A.E. so proudly has achieved.
The views expressed in this article do not necessarily constitute the views of Zawya.
© HPL Yamalova & Plewka JLT 2012
