Residence visa will help boost property market
Residence visas for freehold property buyers in the UAE should have a validity period of at least two to three years as against the proposed six months to ensure stability and attract new investors, said Dubai-based developers.
"The freehold residency visa should come with a longer validity period. They should offer visa with three-year validity and this will help the market," Sanjeet Joher, Group Chief Operating Officer, KM Properties, told Emirates Business.
A federal law granting residency visas to owners of freehold property will be introduced within the year, Brigadier General Nasser Al Minhali, the acting director general of the federal Department of Naturalisation and Residency, was quoted in the UAE media yesterday.
"The proposal will allow owners to obtain a six-month renewable residency visa. The law will allow foreigners to gain residency rights regardless of their nationality or the size and value of the property," he said.
In January, Nasser bin Hassan Al Shaikh, Director-General of the Dubai Department of Finance, had told this paper that the issue of granting visa for property buyers is being dealt with on a federal level.
"The federal government is discussing the visas issue for real estate buyers across the emirates. A unified approach is being taken to address the issue."
In 2002, the Dubai Government took a bold step, allowing ownership of freehold property to expatriates that changed the dynamics of the real estate industry in the region. The real estate sector in Dubai accounts for 15 per cent of its gross domestic product in 2007.
"Previously, Dubai used to grant residence visa for three years, which was renewed for the same period thereafter. I think they should introduce the same system again which will reignite the market and restart sales."
Joher believes that there are lot of Indians, Pakistanis, Iranians and Africans waiting for clarity on the freehold property visa status.
"There are many Indians, Pakistanis, Africans and Iranians who are looking to buy properties in the UAE, but are not buying in absence of a clear visa regulation."
According to Abid Junaid, Executive Director, ETA Star, encompassing the issue of residence visa on a federal level will bring more sanctity to law and will certainly help the overall market sentiments. "We would like to see a visa with at least two years validity period and at less charges. Stand-alone, the issue will not change the situation dramatically, unless the mortgage industry recovers," he added.
According to industry sources, a residence visa with three-year validity in Dubai would cost anywhere between Dh7,000 and Dh10,000 per person.
However, the visas had to be processed by master developers, who in the latter part of 2008 removed the clause of granting visa.
Peter Walichnowski, Chief Executive Officer, Omniyat Properties, said: "Six months is at least better than nothing, but the visa needs to be of a longer duration. I think it will help the market stabilise for some extent."
Besides, the law will help stop distressed or fire sales, as people will get more time to hunt for buyers.
"It will give more security to people who will not have to fire sell in case they fail to meet their obligations. In fact, it will help the market and bring price stablisation," he added.
In a note issue yesterday, Standard Chartered Bank said: "Currently, the real estate sector is seeing a correction which we believe has not run its course. When it comes to policy response, we believe that reviving credit growth and improving liquidity conditions will help stabilise the market. An additional positive step is the reported idea of providing residence visas to all owners of freehold properties."
On the issue of fees and procedure for visa, Bahareh Alizadeh, Corporate Legal Consultant at Fichte and Company, said there must be a one single and certain procedure in place which helps the buyer to estimate his/her chance for obtaining the visa.
"The fees for the visa should be reasonable in order not to defeat the purpose of attracting buyers. Should the legislator opt for a shorter visa period the visa fee should be smaller. All in all the costs for this visa over a period of three years should not be much higher then the costs for an employment visa."
In August 2008, this newspaper had reported that master developers in Dubai had removed the clause that guarantees a residence visa for property buyers from contracts they enter into with sub-developers. The developers had said clearly then that they were just "facilitators" and the granting of residency visa was in the hands of the Department of Naturalisation and Residency.
"We do not assure property buyers residence visas. For freehold property buyers across Dubai, the grant of residence visas is subject to the rules, requirements and procedures of the Department of Naturalisation and Residency, not the developer," Union Properties had said.
A Nakheel spokesperson said: "Upon the purchase of a property, we will provide customers the basis for sponsorship, although the grant of a residence visa is still subject to the rules, requirements and procedures of the Department of Naturalisation and Residency."
Dubai Properties Group Chief Executive Officer Mohamed Binbrek said his company "never assured any visa and was just acting as a facilitator".
No uniformity on time period
The plan to have a federal move towards a uniform law regarding residence visas for property owners must be seen as one of a few legislative tools to revive the real estate market, said legal experts.
"It would certainly help to make real estate projects more attractive. A federal law brings the advantage of uniformity throughout the emirates, which will help avoid confusion. Such a law can encourage foreign buyers, especially from countries such as Iran, Pakistan and India, who have various reasons to embrace a UAE visa, to start investing in the UAE property market again," Axel Jacob, Senior Legal Consultant in the Corporate Department of Fichte and Company, told Emirates Business.
"However, the law obviously has to balance the objective of a revival of the real estate markets with other interests such as security issues, diplomatic relations, labour law requirements."
A three-year residence visa seems too long as properties are often sold a lot earlier, a shorter duration therefore would help UAE authorities to monitor buyers closely and whether they are eligible for a visa before renewal.
A term of one year would seem a good compromise, but the proposed six months are probably sufficient, said the legal expert.
Jacob said the purpose of the visa should be to enable the buyer as an end user to freely enjoy the benefits of his property by entering and staying in the country.
This, however, is only necessary for as long as the buyer intents to personally use the property to live in, even if only occasionally or for short periods during a year.
Therefore, if the buyer rents the property out to a tenant a visa would not be justified. Of course, there might be other reasons why a property owner might enjoy a UAE residence visa even if he does not want to live in.
However, any other possible reason seems insufficient to justify a visa without actually taking the residence in the property in question.
An easy practical solution would be for the buyer not to rent out the property, but leave it empty in order to remain eligible for the visa.
It has always been said, although some confusion exists among property buyers, that the property residence visa does not allow the holder to work in the UAE. It is a labour law requirement that a person can only seek a property visa, if there is no other means of sponsorship available, ie employment visa.
The question as to when a property owner becomes eligible for the visa is an interesting question. If property speculators would become eligible by paying a down payment to an off plan unit such practice would defeat the purpose of the visa. As a reward for the end user the visa should be available for buyer upon hand over of the property, said Jacob.
"Whether the property is mortgaged or not should not have any influence on the eligibility of the buyer for the visa. However, it is likely that local banks are less willing to consider a mortgage for a foreign buyer who wants to rely on the property visa, ie not taking an employment within the UAE. "
A buyer with a property visa should also be able to sponsor his family members and spouse just as if he was holding an employment visa, said Bahareh Alizadeh, Corporate Legal Consultant at Fichte and Company.
It seems apparent that the sponsored will also not be allowed to work in the UAE unless they transfer to an employment visa. Since this law is going to be used merely as an engine to invite foreign investors back to UAE, it should create a good deal for the buyers and offer the highest possible benefit to them.
One example can be issuing the visas for the buyer and his family regardless of the size of property purchased, Alizadeh said.
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