On Monday July 10 the UAE ministry of Finance has announced that residential real estate shall be exempt from the application of value added tax, which will be implemented in the country starting from 1st January 2018.
The same exempt will not be applied to commercial real estate, where 5% VAT will be applied instead.
The government has decided to avoid imposing 5% irrevocable cost to buyer on residential real estate.
The probable imposition of VAT on residential real estate has created an atmosphere of concern in the market until the yesterday’s announcement has been published.
The application on VAT would have imposed a negative correction to the real estate market, even though we are seeing a recovery to the highs of Q1 2015. Real estate is already on a challenging path in 2017, between global economic instability and supply.
It is good news for investors and tenants, it is true that the UAE’s Government decision in order to push forward the market and maintain high numbers of interested buyers,
VAT of 5% on commercial real estate might create a situation where investors will drive their focus more toward residential properties.