Freehold vs Leasehold Ownership in Dubai: What’s the difference?

When we discuss buying property in Dubai, investors and buyers must understand the difference between freehold and leasehold ownership. These two terms are what explain the limits of ownership you, as a buyer, will have over the property; both types of ownership have their own rules to follow, advantages, and disadvantages. If you are looking to buy, you should try to get as much information as you can in order to make an informed decision.

When you talk about buying a freehold property in Dubai, this means that you will own the property and the land that it is on. This allows you to have full control and all ownership rights with no limits to what you can do, period, and there is much more independence.

There is no lease period for freehold property, and you can pass it on to your next of kin or sell it if you feel the need to later on. You also get more freedom as a freehold property owner; you can make modifications, renovations, and any decisions concerning the property without any restrictions.

The most important factor that a lot of buyers consider when looking at the difference between freehold and leasehold is the limitations of ownership, especially when they have specific goals in mind, this is why one of the biggest advantages of freehold ownership is that you have complete ownership and you can use the property as you wish.

Freehold properties are often the option to consider when looking at long-term investments, as they are secure. They can be passed down to your kids for many generations to come and become a legacy for your family. This is also a way to build wealth over time, as it is known that freehold properties show a significant appreciation value.

Another great thing about freehold leases is that you won't have to deal with renewing your lease; there's no stress or extra costs that you have to keep up with every few years, a small hassle you need to deal with when it comes to leasehold properties.

These properties are also a top contending choice for expats, as it's an opportunity for foreigners to get the feeling of permanence and allows them to feel secure in another country.

There are some things to consider when looking at freehold properties, one of them being that when these properties are in more desirable locations, they usually have a higher cost upfront in comparison to leasehold properties. This can make them a less affordable option for some buyers.

Since you will be the sole owner of the property, it's pretty clear that you will have to be responsible for it as well. All expenses, whether it's repair or maintenance, or renovation, will come out of your pocket, and when the property is large, the costs can really go up significantly.

Some find it an issue that freehold properties are not an option all over Dubai, and in the prime locations that people search for, there are not a lot of options. So you may need to compromise on one or another when it comes to this matter. Sometimes you'll have to decide between location and ownership and see which one is more important to you.

A leasehold property is leased from its owner, and it is leased for 99 years or less if there is a special case. If you buy this type of property, this allows you to have rights over the building or house built on the land, but not the land itself, and once the lease period expires, the right to the property is given back to the freehold owner of the property. Even so, there is the option of renewing the lease if it expires, and this type of property can be sold, or rented, or you can live in it just like a freeholder; the benefits are almost the same.

There are certain designated areas of freehold properties that expats in Dubai can buy, since this is not the case with leasehold properties, it allows them to have more options and look at different price points to find something that fits their budget.

Owners of leasehold properties are not liable when it comes to the maintenance and repairs of the property, and they can pass that concern off to the freehold owner of the property to take care of, taking a financial burden off their shoulders.

The initial cost of leasehold properties is usually less than the initial cost of freehold properties, which, again, makes it a more affordable option for those who have a budget or are just entering the real estate market. Moreover, there are more flexible payment plans that can make the burden even easier, as it can be spread out over many years.

There are some things that you may need to consider. If they are important to your goals and are deal breakers, then it's important to know your options to take the next step.

There’s not much room for making changes and renovations on leasehold ownership. If you have plans to remodel or renovate, you need to know what type of renovation is going to be done, inform the original owner, and get their permission before making any changes.

Subletting is not allowed, or there may be issues when looking to sublet the property. Usually, since the leasehold owner is still liable to the original owner, there may be some restrictions that the freehold owner of the property has, and this can make it challenging to sublet the place.

The property ownership that is meant for you depends entirely on your goals and what your long-term objectives are, the constraints you have, and what factors have more importance than others. There may even be a case where both situations seem to have something that you would not prefer, it just goes to what the better option of the two situations is, which is less of a deal breaker.

The first step is to understand and learn; only then can you make the decision that is best for you with the utmost confidence. Step into the market knowing what you want.