Real estate is a very important source of revenue for the UAE economy. For the further growth of the real estate as well as the economy, the concept of musataha rights has been introduced.
A musataha right is a vital tool for real estate development in the UAE. It empowers investors to establish safe investment projects and avoid the restrictions that are placed on owning land.
Meaning of musataha rights in general terms -
The acquisition of property rights other than the purchase of freehold land is a beneficial way of reducing the amount of expenditure. The musataha right is a popular way for investors to acquire such rights.
A musataha right is a specific type of investment partnership between the public and the private sectors, in which the design, build, finance, operations, along with market risks are transferred to the private sector.
A Musataha right allows its holder also known as ‘’musatahee’’ to develop upon and make use of land belonging to the other party. It permits the holder of the property right to own the assets, operate a project, as well as maintain it for a definite period. After the agreed period, the ownership of the project assets and land is transferred back to the Government.
Legal framework for musataha rights –
Rights with regard to property ownership are ingrained in Federal Law Number (5) of 1985 also known as the “Civil Code”. Under the civil code, property right includes musataha rights
Article 1353 of the UAE Civil Code has defined musataha rights as: “A right in rem conferring upon the owner thereof the right to build a building […] on the land of another.”
Musataha agreement invariably is a right that entitles the real estate holders to construct invest, lease, sell, mortgage, or purchase a plot of land for a third party for a term up to 50 years with condition that such acts are not contravening any executive council resolutions.
This term of 50 years can be further extended by mutual agreement of the concerned parties.
Musataha fees -
The Dubai Land Department (the “DLD”) registration fee payable on a Musataha agreement is 1% of the total annual rent while in Abu Dhabi the registration fee payable on a Musataha agreement is 2% of the total annual rent. This fee is collected from the owner of the Musataha right unless agreed otherwise.
The musataha right is thus a very beneficial right as they secure revenue in respect of the land for fifty years or more in some cases and there is no need of spending a huge amount on purchasing the land. Before entering into the musataha form of arrangement is very important that necessary due diligence and legal documentation are done so that the rights and interests of both parties are safeguarded.
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