Dubai's property ownership structure — freehold in designated zones for eligible buyers, leasehold (typically long-term, up to 99 years) elsewhere — creates a valuation distinction that's frequently underappreciated until it affects a transaction, financing decision, or dispute.
Freehold valuation approach
Freehold ownership in designated zones carries no reversionary interest to account for — the valuation approach mirrors standard international freehold methodology: direct comparison for standard residential units, income capitalisation for investment property, with no term-based discount required.
Leasehold valuation approach
Leasehold valuation requires an additional layer of analysis: the remaining lease term directly affects value, particularly as the term shortens. Key considerations include:
- Term remaining. A 99-year lease with 90 years remaining behaves close to freehold; the same lease with 15 years remaining requires explicit discounting for reversionary risk and diminishing marketability.
- Renewal terms and ground rent. Whether the lease includes renewal rights, and any escalating ground rent obligations, materially affects long-term value.
- Reversionary value. In some structures, value must be split between the leasehold interest and the freeholder's reversionary interest.
- Marketability discount. Buyers and lenders alike apply increasing caution as remaining term shortens, independent of the underlying property's physical condition.
Practical implications for owners and investors
Owners of leasehold property with a term under roughly 30–40 years remaining should expect valuation conclusions to reflect a marketability and financing discount versus an equivalent freehold or long-remaining-term leasehold asset — this is not a defect in the valuation, it's an accurate reflection of how the market and lenders treat diminishing lease terms.
Why this matters at sale or refinance
A valuation that doesn't explicitly address remaining lease term (where applicable) is incomplete. If you're selling, refinancing, or disputing value on a leasehold asset, ensure your valuer's report states the term remaining, any renewal provisions considered, and how that fed into the value conclusion.