How does the absence of taxes in the UAE affect the real estate market and investments?

Taxation in the UAE

Taxation in the United Arab Emirates (UAE) is a model of unique tax policy, where citizens face virtually no significant tax obligations. The country has no taxes on the purchase, ownership, or sale of real estate, and rental income is also tax-free. Moreover, there is no inheritance tax in the UAE, and the process of gifting between close relatives does not require any tax payments.

Registration fees

The main financial payment for a real estate buyer involves paying a registration fee, which is 4% of the property's value. This payment is made as a one-time fee, making the process of purchasing real estate in the Emirates particularly attractive for investors and buyers.

Taxes for legal entities

As for legal entities, the most favorable conditions are offered in special economic zones known as free zones. There are about 45 such zones in the country, most of which are concentrated in Dubai. Companies registered here are not required to pay:

• Value Added Tax (VAT)
• Corporate tax
• Customs duties

However, companies operating outside free zones will face a new profit tax of 9%, introduced on June 1, 2023. This tax will affect businesses with an annual income exceeding $100,000. Additionally, such companies are required to pay VAT at a rate of 5%.

Real estate market

The real estate market in the UAE is experiencing active growth and favorable dynamics. At the beginning of 2022, average housing prices in Dubai increased by 7.54% compared to the same period the previous year. The cost of one square meter in this region reached around $6,000. The total number of transactions in the Dubai real estate market has risen to record levels over the past ten years. Between April and June 2022, more than 22,000 transactions were registered, representing a 9.6% increase compared to the previous quarter and a 45.2% increase compared to July of last year.

Customer profile

Among real estate buyers in the UAE, there are both locals and foreigners. In recent years, there has been growth in this segment:

• Apartments at 50.8%
• Villas at 33.9%

The greatest interest is in coastal real estate, as available plots near the sea are rapidly decreasing. Considering current market trends, such opportunities may completely disappear in ten years, making investments in this type of property particularly attractive.

Mortgage lending

Government agencies are actively promoting the development of mortgage lending, resulting in banks happily granting loans to foreign clients. However, it should be noted that mortgage loans can only be arranged for the purchase of already constructed properties. Borrowers have the opportunity to obtain a loan of up to 50% of the market value of an apartment or villa. The interest rate on mortgage loans ranges from 3.8% to 4.2% per annum, and the processing time can take from one to four weeks. The repayment terms can be 10, 15, or 20 years. Loans are issued in dirhams, which are tightly pegged to the US dollar. It is noticeable that banks have relatively low requirements for foreign borrowers, which significantly simplifies the loan acquisition process and makes it more accessible for investors.

Key aspects of buying real estate in the UAE

The main task for foreign investors wishing to purchase real estate in the United Arab Emirates is the need to provide a bank statement for a period of six to twelve months. This requirement may vary depending on the specific financial institution you are working with. Additionally, if a foreign buyer is considering purchasing property at the construction stage, they will have the option of an installment plan from the developer.

In most cases, such an installment plan does not include interest charges and lasts until the construction is completed and the property is put into operation, which can take from two to three years. The advantage of this financing method is the absence of long-term obligations and, most importantly, the lack of large interest payments. Additionally, real estate at the construction stage or off-plan is generally more affordable.15-20%cheaper than already completed residential complexes.

Changes in mortgage programs and "golden visas"

When discussing mortgage programs, it is important to note the recent changes regarding "golden visas" for homeowners.

Investing in real estate in Dubai can yield significant profits, especially when it comes to apartments located in popular areas. Locations that are close to the sea and have access to developed infrastructure and transport routes typically attract more tenants. This makes such apartments an excellent choice for short-term rentals. Meanwhile, villas and townhouses are more often chosen for long-term living, as they provide comfortable conditions for families.

Profitability analysis

Analyze the potential return on investment for apartments located in the most sought-after areas of Dubai. Below are the data on property prices and expected income in various districts of the city:

• Dubai MarinaThe average cost amounted to1,468 AEDper square foot (approximately4,466 US dollarsper square meter), and the expected annual yield is at the level of6.84%.
• Jumeirah Village CircleThe average price is901 AED (which is equivalent to2,742 US dollarsper square meter), with a yield6.82%.
• Downtown DubaiHere, the cost per square foot is2,285 AED($6,955 per square meter), with an expected yield article6.01%.
• Business BayThe average cost is1,555 AED($4,733 per square meter), the yield is5.54%.
• Jumeirah Lake TowersThe price allows for setting an average level.988 AED($3,007 per square meter) and the maximum yield —7.49%.

These figures were collected by experts from SSS Real Estate Brokers and require serious analysis before making investment decisions.

Villas and townhouses

Moving on to the consideration of villas and townhouses, it is worth noting that they also represent a profitable investment option. Let's look at the following examples:

• Damac Hills 2 (Akoya by Damac)The average property price here is638 AEDper square foot ($1,942 per square meter), and the annual yield is5.27%.
• The SpringsThe price here is1,064 AED($2,239 per square meter), the yield reaches5.52%.
• Arabian RanchesThe average cost is1,223 AED($3,720 per square meter), with a yield5.62%.
• Dubai Hills EstateThe cost per square foot is1,519 AED($4,624 per square meter), and the expected yield is —6.05%.
• DubailandThe average price is799 AED($2,432 per square meter), with a yield5.98%.

Residential complexes in Dubai

Now let's take a look at examples of residential complexes in Dubai that could be a great choice for living and a potential opportunity for earning.

• Riviera BeachfrontThis project by Azizi Developments is located in the Meydan area and just ten minutes from Downtown Dubai and Burj Khalifa. The complex consists of three tall buildings along the waterfront, offering all the necessary amenities. Housing options include studios and one or two-bedroom apartments ranging from 31 to 93 square meters. Prices start from720,000 AEDabout197,000 dollarsThe developer offers a payment plan for four years.
• Safa Two (De Grisogono Tower)This 83-story building is located in the prestigious Al Safa area, next to the main artery of the Emirates – Sheikh Zayed Road. A variety of entertainment options are expected, including a landscaped pool, a glass slide on the roof, several swimming pools, and walking areas with stunning views. Housing options include studios and apartments with one, two, or three bedrooms, ranging from 37 to 139 square meters. Prices start from780,000 AED($214,000). The developer offers a payment plan over five years, with the completion of construction scheduled for 2026.
• MinaThis project is a luxurious residential development by Azizi Developments and is located on Palm Jumeirah. It offers private beach access, children's play areas, an infinity pool, and walking areas, as well as restaurants and supermarkets. Only one-bedroom apartments ranging from 70 to 80 square meters and three-bedroom penthouses are available for sale. Prices start from2.3 million AED($620,000), with financing available, as well as a discount on14%upon full payment.
• Palm Beach TowersThis is a new residential and commercial development project consisting of three towers, also located on Palm Jumeirah and developed by the state-owned company Nakheel.

Investing in such real estate can be a reliable strategy not only for living but also for generating stable income. Given the growing interest in the real estate market in Dubai, the opportunity to acquire such housing is becoming increasingly attractive to investors and affluent clients.

Conclusion

In conclusion, it can be confidently said that the economic policy of the United Arab Emirates creates favorable conditions for investing in real estate and conducting business.Absence of taxesThe absence of property, inheritance, and capital gains taxes, along with a one-time registration fee of 4%, makes acquiring real estate in the UAE particularly attractive for foreign investors.

It is also worth noting that free economic zones provide companies with maximum benefits, and with the introduction of corporate tax only for large businesses with profits exceeding $100,000 per year, the government continues to support the active growth of entrepreneurship.

Active real estate market

The real estate market in the country is showing incredible dynamics:

• The rise in prices and the number of transactions leave no doubt about its viability and attractiveness.
• The interest in coastal real estate is likely driven by the increasingly limited opportunities for new construction in these areas.

Opportunities for foreigners

The banking system, by offering mortgage loans to non-residents on favorable terms, contributes to an increase in the flow of foreign investors.New "golden visa" programIt only reinforces this trend, allowing foreigners not only to leave their investments but also to obtain resident status.

Final conclusions

Thus, if you are considering investing in foreignreal estate, the UAE undoubtedly represents one of the most attractive options on the market.High profitability of investment projectsThe absence of tax barriers contributes to successful investment. Don't miss the chance to be part of this rapidly growing market, which continues to attract both local and foreign buyers.