When it comes to purchasing a property, the first thing you will be asked is whether you are looking for Leasehold or Freehold Properties. Whether you are looking for villas or apartments, you will get this question at first. Thus, it is important to know what both of them mean. Here, you will know the difference between Freehold property vs leasehold property in Dubai, and also when you should choose one.
What is Leasehold Property?
Leasehold property is the one where you buy the ownership of it for a specific period. You can generally take the ownership for 99 years. However, it can also be taken for fewer years.
What is Freehold Property?
Freehold Property is the one where you enjoy full ownership. You pay for the property and get full ownership in your hands. Once you buy the property, you can then give it for rental or lease purposes.
Also, read Ready vs Off-Plan Properties in Dubai | Compare Before Investing
Freehold Property vs Leasehold Property in Dubai – Key Differences
Now that you know the basic meaning of both properties, it is important to look at various aspects that differentiate between the two types of properties. Although you get off-plan and ready properties for both types of ownership, here are some of the basic differences between them:
| Factors | Leasehold Properties | Freehold Properties |
| Pricing | A leasehold property is one that is generally of low cost. | You need to pay a high price to get full ownership of the property. |
| Pricing Stability | They will usually decrease by the time the lease period comes near. | Such investments are very stable, especially for the long term. |
| Ground Rents | There is no ground rent that you need to pay for freehold property. | You may have to pay the ground rent for the leasehold properties. |
| Maintenance Costs | The properties in the leasehold areas are mainly managed and maintained by the landlord or the management company. | The services and the maintenance of the property are usually done by the owners’ association. |
| Where to find them | You will only get them in specific leasehold areas in Dubai. | You will get them in the designated freehold areas of Dubai. |
Leasehold Property
Leasehold property is the one on which you buy the ownership for a specific period of time. But is it really a nice investment? To find out, go through the pros and cons discussed further:
Pros of Buying the Leasehold Property
If you are confused about whether to purchase the leasehold ownership of the property or not, don’t forget to check out the benefits listed below:
- Initial Lower Cost: Such properties are generally more affordable, which makes them a better option for people who have a particular budget.
- Maintenance Shared: If you are purchasing a property that is under leasehold development, the cost of maintaining different things is generally shared among all the residents living there. It will reduce the financial burden on the individual owners.
- High security: As the leasehold properties are subject to government regulations, you will get a high level of security.
- Investment Opportunities: Leasing properties are one that gives high rental yields. Most of the investors look for it to get rental income.
- Flexible Options: If you are interested in purchasing the leasehold properties, there will be different lease periods to choose from. It allows you to select the duration for which you need the tenure. It can be from 1 to 99 years.
Also, read Top Off-Plan Properties to Invest in Dubai
Cons of Buying the Leasehold Property
Although there are a lot of benefits to purchasing it, there are some disadvantages too. Below, we have mentioned them:
- Less Control: The biggest drawback of purchasing this property is the one that it gives you limited control over the property. You will need to get permission from the landowners or the government authority to make any modifications to the property.
- Lease Renewal Costs: As the lease period will expire, you will need to pay the renewal cost. It is one of the significant costs based on the duration and location of the property.
- Uncertainty: As you are not the owner of the land, there is high uncertainty about the future of the property.
When is Leasehold Ownership a Better Option?
Below are some of the situations when you should invest in leasehold properties:
- When you have a budget constraint and can not afford the full amount of freehold properties.
- You want to stay in or sell it within in short period of time.
- If the ground rent is feasible.
- When you prefer a good location over the ownership type.
Freehold Properties
Freehold Properties is the one that gives you full ownership of the property. To know if it is a better option for you, we have covered the pros and cons for you.
Pros of Buying the Leasehold Property
Below are some of the benefits that you get with the purchase of the leasehold property:
- Full Ownership: The most important advantage of this type of property is that you have complete control and ownership of the property.
- Long-Term Investment: If you are looking for long-term investment returns, investing in freehold properties is the best option for you.
- No Lease Renewal Hassles: As you are the full owner of the property, there is no cost of renewing a contract or lease.
- Best for Exapatriates: Freehold properties are one of the popular choices for people who come from different countries to live in Dubai. It helps them to get security in a foreign country.
Also, read List of All Documents Required to Buy Property in Dubai
Cons of Freehold Properties
Below are some of the drawbacks of getting Freehold Properties:
- Higher initial cost: If you have a budget constraint, it might be a problem for you to get the freehold properties. However, by getting a mortgage, you may get it. But before taking mortgage, make sure to check the mortgage rates.
- Maintenance Costs: As you are the solo owner, you will have to pay all the costs for maintenance alone.
- Limited Availability: The sad part is that not all areas offer freehold properties. You might have to compromise on the location of the property.
When is Freehold Ownership a Better Option?
Further, we have discussed some of the situations when you should invest in leasehold properties:
- When you want to make long-term investments.
- There are budget constraints.
- If you desire to get the full ownership rights on the property.
- To Avoid Leasehold Restrictions.
- When you want to do modifications freely without any interruptions.
- You want to get a better resale value for your investments.
Conclusion
Both leasehold and freehold properties in Dubai come with their own benefits and drawbacks. Leasehold property is the one where you do not get full ownership of the property. Whereas, freehold property is the one that provides you with full ownership of the property. If you have a budget constraint and don’t want to use the property for the long term, you must get leasehold properties. Whereas, if you don’t have a budget constraint and are looking for long-term investment, getting the freehold properties is what you need.
Also, read Top 10 Benefits of Owning Property in Dubai
