CEMENTING A PLACE

Sharjah 2015 | CONSTRUCTION & REAL ESTATE | FOCUS: EXPATRIATE OWNERSHIP

Sharjah's property market has opened its doors as the government introduces a law allowing expats with a UAE residence visa to own property on a leasehold basis for 100 years.

Attempting to capitalize on the demand for property in Sharjah—a trend which as emerged primarily from neighboring Dubai—the Executive Council of Sharjah issued Executive Council Resolution 26 in 2014 to allow expatriate buyers from any country to own property on 100-year leasehold basis, granted that these buyers have a UAE residence visa. Contrary to Abu Dhabi, Dubai, and Ras Al Khaimah, ownership of real estate in Sharjah has been tightly controlled by the government, and full ownership had hitherto been strictly limited to GCC nationals and a few non-GCC Arabs and Asians with special permission from the Sharjah Real Estate Registration Department.

The resolution will still maintain certain restrictive aspects by only granting ownership rights on leases rather than the actual land on which the property is built. Still, the resolution goes a long way in opening the market, as investors have been eyeing the Emirate for some time due to a massive increase in demand for properties following recent rent spikes in Dubai.

For now, the areas that the resolution pertains to are limited to several large real estate projects such as Tilal City, Al Zahia, and Al Rayyan, which are currently under construction, and ownership of property in most areas of Sharjah remains limited to GCC nationals, and in some cases, Emiratis only. This is part of a deliberate strategy on the part of the government, which seeks to create cluster cities outside Sharjah's overcrowded center, thereby reducing the traffic congestion that has plagued the city for years.

The government is also intent to prevent property flipping, where developers sell off-plan apartments to speculators who immediately sell them for profit-—one of the root causes of Dubai's real estate bubble a few years ago. To counter this, the number of off-plan apartments that developers are allowed to sell has been capped dependent on the completion phase of the project. Additionally, the resolution proposes that only 20% of the property in aforementioned projects will be sold to non-Arabs in order to achieve sustainable growth.

Developers are now increasingly turning their attention to gated communities in an effort to match the developments seen in suburban Dubai, according to property consultant Cluttons. The emergence of such real estate projects will present entry opportunities for investors who are looking to enter Sharjah's real estate market. However, Cluttons reports that, without a proven track record, development financing is likely to remain challenging, at least in the near term.

The new legislation represents a landmark in the real estate market, in line with the Emirate's overall strategy to open up to the world. The huge demand for properties has proven to be a strong incentive to ease restrictions, and it will surely result in significant growth of the sector, also providing an opportunity to shift real estate development from the crowded city center to more suitable areas with better infrastructure. 6