Visa law could shore up property market
YEARS after the abolition of Dubai’s so-called property visa, the UAE government has approved plans to extend the residential visa from six months to three years in a bid to boost the ailing property sector.
Property visas – being granted a visa in exchange for buying property – have been a controversial issue in the UAE for many years, with investors often being given conflicting information on the length of visas they would receive upon the purchase of a property.
The period was shortened to six months from up to five years in May 2009, sparking criticism from homebuyers and investors.
Moreover, the rules have never been formally legalised – meaning investors are at the mercy of prevailing practices.
The latest decision is part of a raft of measures designed to stimulate economic growth. Here, cashy speaks to Ludmila Yamalova, founder and managing partner of legal firm HPL Yamalova & Plewka JLT, to find out what it’s all about. Here’s what she had to say…
What’s the state of play just now?
Not that long ago there was a practice of granting five-year renewal residence visas to property owners through special arrangements between the master developers and the respective immigration authorities of each Emirate. That practice was just that – practice – and not the law.
In 2008, the UAE made a decision in favour of a uniform federal immigration policy – and the repeal of the property visa practice was quick to follow.
In its place, there were discussions of the introduction of a federal property visa law. For a while, these discussions were so active as to even elicit specific details of the alleged new requirements. For example, the visa would be issued for a six-month term. Only properties valued at the minimum price of AED 1 million ($272,000) would qualify. A monthly income of AED 10,000 ($2,723) would be required, along with medical insurance.
However, the federal decree that was supposed to codify that law has yet to be published. Therefore, as of today, there is no expressed evidence of that law ever being enacted.
Why is this issue so controversial?
The abolition of the property visa has left many investors, who relied on it in buying their property, in a confusing state, especially those investors who have purchased homes in Dubai as their secondary or holiday homes.
They don't reside in Dubai and, therefore, don’t qualify for any other type of visa. But because so much of every day-to-day living in the UAE, Dubai including, is tied to the residence visa, these investors are now faced with all sorts of inconveniences, not to mention paradoxes.
For example, they can own a villa, but not a car. This is because to register a car requires a residence visa. So, there are investors who own villas on the Palm and Emirates Hills where for the last several years they kept their legally-bought cars, but can’t now renew those cars because they no longer have a visa.
Unable to find any other viable options, many such investors are registering their cars in the names of their friends.
What are the new proposals?
The legal form of the new property visa is not expected to be the same as its predecessor. In fact, it will not really be a property visa, but a business visa. As such, it will not be governed by the immigration law, which is subject to UAE federal regulation, but companies’ law, the regulation of which is largely down to each individual Emirate.
The new visa would be based on the formation of a free-zone company, the sole purpose of which is to own property. The company would be 100% owned by the investor and would be the registered owner of the property. The company would have the legal basis to issue visas to the company’s shareholders, much as any other UAE company issues visas to its employees. The visa would remain valid as long as the company exists.
Will it work?
In order for the new visa scheme to have the desired effect of bringing investors back to Dubai, the costs and procedures for setting up such companies must be significantly less expensive and cumbersome from those that exist today.
Firstly, the costs must be affordable and transparent. The company formation is usually accompanied by high and often hidden fees, including set-up, annual renewal and winding down fees.
So fees for forming and managing a property company would have to be minimal, especially as they are in addition to the fees associated with buying and owning property. Furthermore, there must not be a requirement of leasing an office space, as is the case with any UAE-registered company.
Secondly, the formation of such companies must be an efficient process. It must allow for a quick set-up, bearing in mind that the investors, whom this new visa scheme aims to attract, don’t reside in Dubai.
A number of procedural issues would have to be clearly spelled out, and the question of dependents would also need to be addressed.
Pic credit: Salvatore Vuono/ FreeDigitalPhotos.net
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