DUBAI, (Reuters) – Iraqi Abu Zainab took a big loan to join a crowd of homebuyers seeking a piece of the “Dubai dream”, after violence at home forced him to look for a safe haven where he and his wife could spend their grey years in peace.
Like many others the 52-year-old father of four bought a house in the booming Gulf emirate, finding comfort in the idea that the purchase would automatically entitle him to long-term residency rights in the city that gives foreigners freehold deeds on their properties.
But such hopes faded this year after the emirate’s real estate regulator said that owning a property would not automatically result in a residency visa — something many developers had promised, so much so that the idea became a cornerstone to the Dubai dream.
“I thought I could grow old in my house and when I die my children could live in it,” said Abu Zainab, who bought a house after the 2003 U.S. invasion of Iraq.
“My wife doesn’t work and my children are too young to work; what will happen to them if I die tomorrow? Will they be sent back to Iraq?”
Buyers from countries such as Iraq, Iran, Pakistan, Somalia, Sudan and Lebanon have featured prominently among Dubai property buyers as instability or fear of war encouraged them to look for safe haven in the glamorous new city.
Abu Zainab’s concern is that residency rights are not enshrined in Dubai’s property law although many developers in the emirate have dangled promises of permanent residency for potential buyers.
“I didn’t see developers being punished for making false promises to people,” says Abu Zainab.
In an embarrassing reversal, many major Dubai developers now say that homebuyers are not guaranteed residence rights.
Executives at Nakheel, government-controlled developer of islands in the shape of palm trees, and listed Union Properties UPRO.DU said earlier this year they make no assurances of residency rights.
VERBAL PROMISE?
But buyers tell a different story. They say some developers had promised residency rights in advertisements and in sales pitches.
“The man at the sales counter told me it (residency rights) will not be in the contract, but he assured me that it will happen whenever Dubai amends the law like they did with the property law,” said Tony, a Lebanese who recently bought an apartment in a posh Marina high rise overlooking a man-made bay.
“I trusted the salesman because the situation is changing for the better all the time,” he said. Dubai was a sleepy seaside town until the 1980s, when it began to transform itself rapidly into a commercial and tourism hub.
The residency law in the United Arab Emirates, a federation of seven emirates including Dubai, does not provide for permanent residency status to foreigners, who are able to renew their visas mainly if they are employed in the country.
Developers generally sponsor three-year visas for homeowners so long as authorities approve them on case-by-case basis.
It would not be the first time investors took developers’ promises seriously. Dubai — home to the world’s tallest tower and a ski slope in the desert — opened its real estate market to foreigners in 2002 through a government decree before passing a law formalising it.
At the time, property buyers took a risk because their freehold rights were only promised by developers, and did not become law until 2006.
Without giving the same legal backing to residency rights, foreigners — who comprise more than 80 percent of the UAE population of 4.5 million people — could be less likely to buy properties in the emirate, ING bank said in June.
ING has said the existence of “safety homes” in Dubai has been a key factor driving demand, and any decision by regulators to review the visa status of existing homeowners would create a “legal minefield”.
Appetite for Dubai real estate has hardly collapsed, however.
Residential property prices in the emirate could jump 35 percent this year, according to a Reuters poll in August, illustrating that demand continues to outweigh supply.