Investor Stimulus: Massive cut in land lease fees

By Eudore R. Chand

ABU DHABI 2 June 2019: The Abu Dhabi Executive Council has issued resolution No. 127 for 2019, reducing municipal fees for Musataha agreements in Abu Dhabi by amending resolution No. 49 for 2018 about the same.

According to the new resolution, the fees for registering Musataha agreements will be reduced from 4 per cent of the returns value, to 1 or 2 percent, or exempted fully, depending on land location and usage classification, said Wam.

A Musataha Agreement creates a real property right, which entitles its holder to construct a building or to invest in, mortgage, lease, sell, or purchase a plot of land belonging to a third party for a period of up to 50 years, provided that such acts do not contravene any Executive Council resolutions.

The new resolution, which is effective immediately, comes to further facilitate and promote investments and limit the cost of developing projects.

At the end of last year, His Highness Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, Deputy Supreme Commander of UAE Armed Forces, and Chairman of the Executive Council, had instructed the Executive Committee, an affiliation to the Executive Council, to re-examine the terms of Musataha agreements for all projects within Abu Dhabi. The aim of the review was to attract long-term investors who wish to establish long-term investment projects that support local development and contribute to diversifying the economy and achieving sustainable development.

Registration fees vary depending on the classification of the location of plots (prime vs. developing), and usage classification such as commercial, leisure, general area, agricultural, industrial, and so forth.

Fee Cap

The new resolution also stipulates a fee cap for projects in the services, educational, healthcare and industrial sectors, to increase investors’ appetite and act as a catalyst for new projects.

The new resolution is a part of a series of initiatives introduced by the Government of Abu Dhabi to support investors and promote the launch of new projects in several key sectors that support the local economy and create new jobs.

As per the new resolution, rent of lands allocated by the government will now be directly paid to the Musataha right holder, and defined the rent value as 75, 50 and 25 fils per square foot in Abu Dhabi City, Al Ain, and Al Dhafra region, respectively.

Parties renting industrial and other land plots directly from the government have the right to sublease, subject to relevant municipality’s approvals and current regulations. The resolution defines the municipal registration fees payable by the renter for all agreement related to renting lands, industrial properties and lands, and properties rented from the government, to be no less than 5 percent of the contract value and capped at 10 percent.

Installments

The resolution also allows paying the registration fees for Musataha agreements, except for industrial lands allocated to Emirati nationals, in installments over the course of contract duration and once the project is up and running.

Furthermore, the resolution exempted private schools with average annual schooling fees of less than Dh20,000, from paying registration fees for Musataha agreements, dependent on data available at the Abu Dhabi Department of Education and Knowledge.

The resolution has capped registration fees for long term leases or usage at 1 percent of the returns value.

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Dubai Gazette