Since residents of the UAE are not subject to income tax and the local economy is growing rapidly, investors from all over the world are choosing this country for investment and high returns. In a 2021 report by Resonance Consultancy; an international consulting company, Dubai was ranked second in the top 5 best cities on the planet to live, work and invest in.
In this article, we will look at the main ways to multiply capital in the UAE. You will be able to choose the most suitable investment opportunities based on the size of your savings and the goals and timing of your investment strategy.
Investment Opportunities in The Emirates
You can build your investment portfolio in the UAE from stocks, bonds, different types of funds, as well as investing in real estate for a passive income. Let's break down the features of each of these assets.
Shares are securities that give shareholders a stake in a company and the right to receive dividends. Shares are traded on the stock market, so when you buy shares, you become the owner of part of the company. These securities can be sold and bought at any time. There are two options for generating income from buying shares/stocks:
There are three exchange centers in the UAE: NASDAQ Dubai, Dubai Financial Market (DFM) and Abu Dhabi Securities Exchange (ADX). To start investing in the stock market, you will need to register for a National Investor Number (NIN), which is issued free of charge. Furthermore, it is recommended that you hire a stockbroker, as individuals cannot buy or sell stocks in the markets themselves.
When investors buy bonds, they lend their money to companies and expect to receive a certain return. Typically, the full amount and timing of the return is known to the investor at the time of purchase. One of the main advantages of investing in bonds is the ability to assess your benefits in advance.
The main risk of this type of investment is the possibility of bankruptcy of the issuing company, since, unlike deposits, bonds are not protected by deposit insurance and investors can lose money.
Depending on the collateral, bonds are divided into three types:
The UAE has established the savings and investment company National Bonds, which is owned by the government organization ICD (Investment Corporation of Dubai). Residents of the UAE, as well as non-residents from the age of 21, are entitled to purchase government bonds.
In addition, in October 2021, the UAE issued for the first time, multi-tranche sovereign bonds in U.S. dollars in an effort to attract new financing amid low global interest rates. The Ministry of Finance said that the new package of bonds to be issued for a subscription includes medium- and long-term tranches: a 10 and 20-year tranche, in addition to a 40-year Formosa dual-listed tranche.
Note: We also recommend that you read our guide on how to invest money in the UAE for beginners.
A mutual fund (Mutual Fund) consists of stocks, bonds, real estate and other assets selected by stock market professionals. This is the best option for investors who do not have enough knowledge and time to select securities for their portfolios on their own.
Mutual funds have very large sums of money coming from depositors and can therefore buy many different assets, ensuring high diversification (that is, the distribution of capital among a large number of industries, companies, instruments, etc. which reduces the risks if the price of one or more assets falls).
An investor who invests money in a mutual fund becomes the owner of its part - a unit. When the shares and bonds purchased by the fund bring dividends or interest, the profits are distributed among the unit-holders. In addition, the value of the unit increases in parallel with the growth of the price of shares and bonds purchased by the fund. Another factor in the growth of the price of a mutual fund is the increase in demand for it.
There are open-ended and closed-ended mutual funds in the UAE stock market. Open-ended funds are available to buy and sell at any time, while closed-ended funds have a set maturity date. Mutual funds are also divided into passively and actively managed funds. The former rarely buy and sell their assets, while the latter frequently change the composition of their investment portfolios and try to play on market dynamics. Actively managed funds promise investors higher returns, but they have higher risks and fees.
ETFs (Exchange Traded Funds), like mutual funds, provide good diversification and the opportunity to earn income from a large number of different stocks or bonds. But unlike mutual funds, ETFs are more transparent and reliable. You'll know exactly which assets are in the fund, and you can be sure that the composition of your portfolio won't change drastically.
To further diversify your personal portfolio and reduce your investment risk, you can buy ETFs from a variety of sectors (e.g. UAE equity ETFs, U.S. bond ETFs, IT and healthcare asset ETFs).
The Emirati real estate market has successfully almost recovered from COVID-19 due to effective vaccination measures, government support and the increase in demand for different properties. If you are not ready to obtain the whole property, you might be interested in REITs (real estate investment trusts). These are stocks of companies obtaining real estate properties including hotels, apartments, offices, malls, etc.
REITs are offered in the form of stocks and can be bought or sold like shares. An investor obtains income through regular dividends and appreciation through the price of the REIT. It’s advisable to buy REITs as ETFs instead of individual stocks that might be risky.
Shares of companies are divided into those that purchase real estate (equity REITs) or provide mortgages (mortgage REITs). The investor acquires the assets without the negative consequences of further disposition of the property.
REITs are more liquid than physical real estate, as you can sell shares at market value, making a profit in a few days, while it takes much longer to sell physical real estate. This is an opportunity to enter the real estate market with minimal investment. An investor can also shorten their position or exit at any time as REITs trade in the stock market.
Real Estate Investment
Investing in real estate is one of the most stable ways of earning a passive income in the UAE. The UAE real estate market continues to attract foreign investors because of the many advantages, including the absence of capital gains tax, the possibility of obtaining an investor visa for a period of 3 to 10 years, and the diversity of investment projects. In addition, there is no need for a personal visit to the UAE in order to make a property purchase, as it can all be done online. In the UAE, you can also take advantage of the benefits of mortgages (even for off-plan properties) as banks will cover 80% of the cost of the property up to AED 5M (USD 1.3M) and 70% if the price of the unit exceeds this amount.
Developers offer attractive payment plans when purchasing off-plan real estate. The total cost of the unit is divided into several parts, which are paid during the construction of the property, and the last part is repaid either at completion or within a few years after delivery of the building. The buyer becomes the owner of the property by paying a down payment of about 5-15%. Once a certain percentage is paid to the developer, the real estate, which would have already increased in value, can be resold at a profit.
Note: It’s worth noting that foreign investors can obtain properties only in freehold areas of the emirate. Here you can read more about the most popular areas for investment in Dubai.
Buying real estate to then rent is a good way to make a profit, and Dubai has one of the highest rates of return on investment - from 5% to 9% per annum. Of course, this option can involve a considerable amount of time and money for the search of tenants, the subsequent maintenance of the unit, inspection upon check-in and check-out, and other factors relating to owning and renting property. Therefore, in such cases, it is recommended to resort to a property management service, as specialists on behalf of the property owner will take care of the entire process, from finding tenants, drawing up contracts and ending with the collection of rental cheques.
Do not forget about the country’s "residency for investment," programme, such as the Taskeen Program from the DLD, through which you can become a resident of the UAE, if you invest in ready-made property in Dubai from AED 750K (USD 204K). If you do this, you will receive a visa for 3 years, which will not only allow you to move to the emirate, but will also enable you to bring your family members (wife/husband/children) to the country as well. If you choose to buy off-plan projects, it is also possible to apply for this visa, but only after the project is fully commissioned.
If you are planning to buy property in Dubai, we recommend you read our step-by-step guide to buying property in Dubai for ready-made and off-plan projects.
How Can We Help You?
Metropolitan Group has been successfully operating in the Dubai real estate market since 2008, and is a designated agent of Emaar Properties, with access to the best properties in the emirate. In addition, all of our brokers are RERA (Real Estate Regulatory Agency) certified and we work exclusively with reliable developers in the UAE.
Our agents at Metropolitan Premium Properties Company, are ready to provide you with professional help, starting from finding the right property for you, preparing all the documents and assisting with the transaction itself. As well as the general procedure, our professionals will consult with you about buying property with Bitcoin as well as getting a mortgage.
All our real estate agents are RERA licensed and create an individual approach to all clients. You can provide information regarding the benefits of both off-plan and ready-to-move-in units, as well as ROI’s in Dubai areas that will help you to make the right choice if you are obtaining a property for rent. Foreign clients might also be interested in obtaining a Dubai Visa as we are ready to help you with anything you might need related to buying, selling or renting a property.