JVs can be a win-win in Dubai’s real estate

In anticipation of the World Expo 2020 and as part of the broader UAE vision 2021, the Dubai real estate market has experienced an increase in the use of joint venture arrangements between foreign developers and local land owners as a means of developing real estate. More often than not, such joint venture arrangements are proposed by experienced foreign developers to land owners who may not have the time or know-how to monetise the land. However, if structured properly, both parties can come out winning from such an arrangement. In Dubai, a joint venture between a foreign developer and a local land owner can be structured through an “incorporated joint venture” or a “contractual joint venture”. Under an “incorporated joint venture” structure, a new company is incorporated and which is jointly owned by the joint venturers. A joint venture arrangement is typically managed by a board of directors. However, there is often a list of reserved matters that require shareholder approval. It is also common for joint venture partners to execute non-compete agreements. Although the law prescribes that in an LLC, the local land owner must own 51 per cent of the share capital, the joint venturers can determine an alternative ratio for the profit and loss distribution themselves.