Free Zone vs Freehold : What is the difference?

Written by Unique Properties

Free zone and Freehold are two terms we hear quite a lot in Dubai’s real estate market and it may be bit confusing at first knowing what exactly each term means and stands for. If you carry on reading this article you will have crystal clear understanding of what each term means and we will also give you some tips to help you decide whether you should invest in freehold or free zone property.

Free zone

Free zones aka free trade zones are special economic zones in Dubai in which the government exempt taxes from companies operating in them. These areas are exclusive for businesses and usually do not have any residential units. Foreign companies and business owners find investing in the free zone areas ideal since they could use Dubai as a manufacturing region or distribution base for their products, this attracted lots of foreign companies due to its tax exemption and Dubai’s ideal business location. It is also worth mentioning that business owners who have their businesses set up in the free zone have full ownership of the business.

 Areas:

– Dubai Multi Commodities Centre (DMCC)
– Jebel Ali Free Zone (JAFZA)
– Dubai Airport Free Zone
– Dubai Cars and Automotive Zone
– Dubai World Central (DWC)
– Dubai International Academic City
– Dubai Internet City
– Dubai Media City
– Dubai Knowledge Village
– International Media Production Zone
– Dubai Silicon Oasis (DSO)

Advantages:
– 100% ownership of the business.
– Eliminating the need for a local partner
– Tax free

Disadvantages
– No residential property within the zone.
– Companies in the free zone are only allowed to operate within free zone areas.

Freehold

Dubai free hold areas are locations in Dubai where a non-GCC nationals can buy a property. These areas where designated by the ruler and were established by the law number 7 of 2006 concerning the land registration in the city of Dubai. Owning a property in this area gives the buyer full ownership of both the land and property.
When a buyer purchases the property, they are free to rent, lease or sell the property. In addition the buyer does not have to be a residence of the UAE, foreign investors can also purchase a property in freehold areas.

Once you have purchased a property in one of the freehold destinations in Dubai, you will have to register your name as the landowner with the DLD (Dubai Land Department). This will officially entitle you as the property owner and the contract will be applicable in perpetuity, which means that any family member entitled will inherit the property.

 Areas

Dubai Marina
The Palm Jumeirah
Jumeirah Beach Residence
Business Bay
Emirates Hills
Arabian Ranches
Downtown Dubai

These are just few of the free hold areas, you could click here to view all free hold communities and properties for sale within them.

Advantages:
– Owner can rent, lease or sell the property.
– Buyer has complete control of the property.
– Vast investment opportunities.
– Property stays in the family for generations to come.

Disadvantages:
– Not business friendly for foreign investors as you could only own 49% of the company shares and need to have a local partner. (This will change soon)

Which one should you invest in?

The answer to whether you should invest in free zone or in freehold solely depends on the main purpose of your investment. If you are looking to buy a property in-order to start a business and have full ownership, then we recommend purchasing a free zone property, this is because until today, if you want to start your own business in one of Dubai’s freehold areas you will not have full ownership of the company as you should have a local partner with shares of at least 51% of the company.

However, this will change soon as the UAE Cabinet has recently announced decisions allowing 100% ownership of UAE based enterprises outside the free zone for international investors, this new law is expected to be implemented by the end of this year. But until the law is implement we strongly recommend new business owners to start their businesses in one of the free zones and later move or branch out to free hold areas.

On the other hand if you are looking to buy you own property whether that is to live in, rent or even sell later, your only good option is a free hold property as you will have full control of the property. Off plan projects is usually our recommendation as they are sold lower than there actual market price and offer high rate of ROI.

We hope our article was informative and helpful, if you have any questions feel free to leave a comment below and one of our leading agents will be happy to answer them.