15 Best Investment Options in UAE
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Introduction
Now is the best time to invest in UAE. This article discusses 15 of the best investment options in UAE.
The investment market is more popular than ever, from mutual funds to stocks. Unquestionably, one of the best ways to accumulate capital and save money for a better and safer future for both you and your family is to invest the money you have saved.
Furthermore, looking back, investing your money now while making minimal concessions to your current needs may prove to be one of the best choices you ever made. However, it is obvious that understanding and carrying out investment planning can be challenging.
Since you’ll be putting your hard-earned money on the line and you definitely don’t want to lose it all, there are many things to consider, from risk evaluation to timeline study.
However, the majority of available independent and best investment options in UAE are quite risky and involve higher levels of risk.
The existence of investment plans offered by insurance companies in the UAE is made possible by this uncertain situation, which also leaves a lot of room for proper planning.
UAE investment plans are the ideal choice for people looking for secure, moderate- to low-risk but best investment options in UAE because they are significantly safer and less risky than other investment options.
Investment Climate in UAE
The UAE government is working to diversify its economy, which benefits the growth of the private sector and lessens the state’s reliance on the shaky oil and gas sector.
The nation draws investments in a variety of industries to diversify its economy, including manufacturing, logistics, healthcare, scientific research, renewable energy, and advanced technologies.
For the development of the nation, the government is implementing a number of initiatives to increase FDI. The UAE unveiled a new industrial strategy this year with the goal of boosting the industrial sector’s contribution from AED 133 billion to AED 300 billion (USD 81 billion) over the following ten years.
Sheikh Mohamed bin Zayed stated that the program’s objective is to double the industrial sector’s GDP contribution while also raising value within the nation.
The nation’s investment advantages to ensure sustainable economic development following the COVID-19 pandemic serve as the foundation for the initiative.
13,500 new industrial companies have been founded as part of Operation 300bn. According to the program, industrial R&D spending will rise from AED 21 billion to AED 57 billion by 2031.
Additionally, the marketing campaign “Make it in the Emirates” will highlight the benefits of manufacturing in the UAE and establish a reputation for quality.
Operation 300bn and Make it in the Emirates are two UAE initiatives that seek to restructure the nation’s industrial ecosystem. Additionally, they share the desire to boost R&D, boost competition, and create new jobs.
In 2020, the UAE issued Federal Decree-Law Number 26, allowing 100 percent foreign ownership of companies in a variety of industries.
Previously, a UAE citizen or a GCC national had to be the company’s majority shareholder. UAE joint-stock companies are no longer required to have a citizen of the UAE as the company’s CEO or have a majority of UAE residents on their board of directors.
Furthermore, a UAE national or a UAE-owned business is no longer required to act as an agent for local branches of foreign corporations.
However, businesses engaged in strategically significant industries like oil and gas, utilities, defense, and transportation will not be subject to the new provision.
The Dubai Investment Development Agency (Dubai FDI), a division of Dubai’s Department of Economic Development, was established in 2015 to offer foreign investors and businesses the information and assistance they require.
The Abu Dhabi Investment Office, which gives investors information on the emirate’s investment environment, was established by Abu Dhabi’s Department of Economic Development in 2018.
In order to draw foreign investment into the local economy, it was also successful to open such a business in the capital of the UAE.
The nation has more than 135 double tax treaties with other nations, allowing investors to profit from the absence of personal income tax and corporate tax from their own nation.
A total of 101 agreements have also been signed by the UAE to safeguard investments from expropriation, nationalization, freezing, and sequestration.
Tax on Investments in UAE
The sale of real estate or securities by an individual in the UAE is not subject to capital gains tax or personal income tax. Only foreign banks and oil companies are subject to the government’s corporate tax.
The highest rate of corporate income tax, which is 55% of the income earned in the UAE, is levied against oil companies. Foreign bank branches are required to pay tax on their profits at a rate of 20%.
However, businesses based in free zones are exempt from paying corporate taxes for a limited time that can be extended.
Only specific products that are typically harmful to human health or the environment are subject to excise tax in the United Arab Emirates.
These products include carbonated beverages, which are subject to a 50% excise tax, energy drinks, which are subject to a 100% excise tax, tobacco, which is subject to a 100% excise tax, as well as electronic smoking devices and accessories.
Different emirates of the nation have different rental tax rates. Dubai requires foreign tenants of residential real estate to pay 5% of the annual rent, while foreign tenants of commercial real estate are required to pay 10%.
In Abu Dhabi, foreigners are required to pay 3% of the monthly rent. No matter if they are residents of the UAE or foreigners, tenants in the emirate of Sharjah are required to pay a 2% rental tax.
15 Best Investment Options in UAE
1. UAE National Bonds
Many investors believe that selecting a highly secure investment option is important in considering the best investment options in UAE.
The type of investment controlled or issued by the government is one of the safest and best investment options in UAE available in the country.
When the bond reaches its predetermined period of maturity, investors can receive a refund of the total amount invested in the bond.
One significant advantage of using National Bonds is the low initial investment amount. Investors can start with as little as AED 100. There is also flexibility because the invested funds can be redeemed at any time.
Bonds will be issued for a period of one to twenty years. Furthermore, there are numerous options available, including saving bonds. If you want a more immediate option, you can redeem a bond after 30 days.
2. High-Yields Saving Accounts in UAE Banks
Savings accounts in UAE banks and abroad provide a modest return on investment. Most bank saving accounts pay less than 1% interest.
However, using a bank for savings is preferable to leaving your money in current accounts with no interest.
Always look for digital banks to find the best interest rates. Because these banks run the majority of their operations through artificial intelligence and chatbots, their operating costs are low. They can afford to pay high rates of return on savings accounts.
For example, Liv bank, a digital bank owned by Emirates NBD, pays a savings account interest rate of 1.5% per annum, which is considered very high in comparison to other banks in the UAE and even globally.
3. Business
One of the best investment options in UAE is putting up a company.
A foreign investor must apply to the Department of Economic Development (DED) in the emirate where the company will be established, which can be Dubai, Abu Dhabi, Ajman, Sharjah, Ras Al Khaimah, Umm Al Quwain, or Fujairah.
Investors will receive preliminary approval for a business and register a trading name at the DED.
Investors can also establish a business in one of the UAE’s free zones. In the country, there are 45 of them. To open a business in these zones, you must have the following:
- Determine the type of legal entity
- Choose a trading name
- Apply for a business licence
- Choose an office space
- Get pre-approvals and register the business
- Get a business licence
One of two business types can be established in the free zone:
- Free Zone Limited Liability Company (FZ LLC) or Free Zone Company (FZ Co.)
- Free Zone Establishment (FZE)
The number of shareholders and whether a shareholder is an individual or a legal entity determine which of these types of businesses is which. Existing domestic or international businesses are also permitted to open branches in UAE free zones.
There may not be any minimum capital requirements to launch a business in some trade zones. Abu Dhabi’s twofour54 is one such area. AED 150K (USD 41) should be the minimum paid-up capital for an LLC in KIZAD.
An FZCo can be created by investors. only if the share capital totals at least AED 1 (USD 272), and each share must be worth AED 1 in the Dubai Airport Free Zone. AED 150 (USD 41) serves as the share capital for the creation of a FZE in the Hamriyah Free Zone.
Companies founded in free zones are subject to their own regulations.
The investor must submit an application with supporting documentation in order to receive the required approval; the list of required documents varies based on the type of business activity, the type of business, and the requirements of the free zone authority.
The following general list of documents is required to get initial approval:
- Completed application form
- Business plan
- Copy of existing trade licence/registration certificate (if you are an existing company and it is applicable for local companies only)
- Coloured passport copies of the company’s shareholder/s and the appointed Manager/Director for the new company
- Specimen signature of the company’s shareholder/s and the appointed Manager/Director for the new firm
- Audited financial reports for 2 years for a corporate entity or the certificate of reference from a personal bank of the individual shareholder
- NOC from current sponsor (for individuals)
- Letter of Intent
- Unit title deed
- Registry Identification Code Form (RIC) for Manager/Director (original and notarized)
4. Stocks and Shares in The UAE
One of the most common but best investment options in UAE are stocks and shares.
A stock is a piece of a company’s capital that investors can purchase. Stock ownership can make investors money in two ways:
- Dividends. It represents a portion of the company’s net income that is distributed to stockholders. Dividends are paid by the company based on the number of shares you own. Dividends are normally paid every three months.
- Stock price appreciation. Stock price appreciation is ideal for long-term investing. For example, if an investor paid AED 80 (USD 21) for a share in a company several years ago and it is now worth AED 175 (USD 47), the investor has made AED 95. (USD 26).
Individuals who want to invest in the UAE stock market must first open a trading account with a broker who is registered with one of the exchanges.
The country has three exchanges: Abu Dhabi Securities Exchange (ADX), Dubai Financial Market (DFM), and NASDAQ Dubai.
Investors will be assigned an Investor Number in order to trade on the ADX and DFM. This number is available from the exchanges’ Investor Services Desk.
It is advised to proceed with caution when it comes to the chosen sector, company, and market fundamental and economic indicators.
5. Short Term International Bonds
Short-term international bonds can be purchased to benefit from growing markets outside of the UAE. Investing in US bonds is one of the most popular best investment options in UAE, particularly because they are regarded as extremely safe. Furthermore, they are easily accessible via online platforms.
6. Mutual Funds
A fund manager manages mutual funds by collecting money from investors and investing it in bonds, stocks, securities, and so on.
When a manager receives funds, they usually divide it into smaller portions in order to invest in stocks of various companies, reducing the risk of exposure.
Mutual funds are available from the following UAE financial institutions: Mashreq, ADCB, Citibank, HSBC, CBD, Emirates NBD, and others.
Mutual funds offer a Systematic Investment Plan (SIP), which allows investors to invest a set amount of money each month for a set period of time. Capital gains and dividends will provide returns. The minimum investment amount in SIPs is approximately AED 734. (USD 200).
Mutual funds generate revenue in two ways:
- Dividends/interest: Mutual funds purchase stocks or bonds and then distribute dividends or interest to fund shareholders (depending on the number of shares)
- Mutual fund value appreciation: the price of a mutual fund is determined by the value of purchased bonds and stocks, as well as the demand for this organization.
In the best-case scenario, the investor’s share of the mutual fund should grow every day. The value of the assets in which the funds are invested directly affects the price of the investor’s share.
After some time, the investor can sell their share for more than they paid for it, resulting in a higher income.
For example, suppose an investor decides to put AED 100,000 (USD 27) into a mutual fund. At the same time, one share costs AED 1 (USD 272), and the required surcharge is 1%.
As a result, one share will cost AED 1,010. (USD 275). An investor can purchase 99 shares for AED 100. After a year, for example, the investor decides to sell their mutual fund shares.
The cost of a single share has increased by AED 326 (USD 88) and is now AED 1.32K. (USD 361). The investor will receive AED 130 (USD 35,4) for their 99 shares after applying a 1% discount. As a result, the income will be AED 30 (USD 8,2) for the entire year.
7. Property or Real Estate
The following are the most appealing real estate investment opportunities in the UAE:
- Purchase and subsequent leasing of residential real estate
- Purchasing commercial real estate both outside and inside free economic zones. The property can then be rented to business owners.
- Hotel apartment acquisition
Inflation will have no effect on property investments in the UAE. On the contrary, the country’s real estate prices continue to rise.
According to CBRE, residential property prices in Dubai increased 4.4% in the first eight months of 2021, the highest annual growth since February 2015. According to the CBRE report, average residential prices in Abu Dhabi increased by 2.2% between January and August 2021.
Residential Real Estate
The cost of residential real estate in Dubai is less than that in Europe or the United States.
For instance, if you want to purchase a 1,291 square foot apartment. in Dubai, the price per square foot. ft will be equivalent to about $531. This amount reaches about USD 2,363 per square foot in London.
The lack of new residential developments in the city, particularly in the central area, where there is essentially no available space for new projects, is the cause of the extremely high prices in the capital of the UK. Real estate is therefore extremely expensive to buy, sell, and rent.
Choosing the right district in Dubai to buy a property is critical because the location affects the expected ROI. Dubai Marina, Palm Jumeirah, and Downtown Dubai are all popular tourist destinations in the emirate.
Throughout the year, the average occupancy in these communities exceeds 85%, and this figure will only rise as a result of Expo 2020. Other good areas to buy real estate include Sports City, Business Bay, Dubai South, and Barsha South.
These neighborhoods are also located near the exhibition site. Good real estate investments in the emirate of Dubai can provide rental returns ranging from 8% to 10%.
For instance, the starting price for an 859 sq. ft., 1-bedroom apartment would be $1,500. ft for sale in the Downtown Dubai region is AED 720K (USD 196), and the entry-level rent for a 1-bedroom apartment in this neighborhood is AED 55 (USD 15), with an average gross investment yield of 5.35%.
However, the ROI in some locations can reach 7% annually. The ROI requirement for two-bedroom apartments on the Palm Jumeirah is 6%.
The starting price for a two-bedroom apartment in the same building with a 1,633 sq. ft is priced at AED 1.68 (USD 457), with an annual minimum rental of AED 95 (USD 26).
Commercial Real Estate
Similarly, investors can profit from investments in commercial property in the UAE that’s why it is one of the best investment options in UAE.
For example, in Dubai, the minimum price of a warehouse for sale with an area of 4,500 sq. ft costs AED 1.39. (USD 378K).
A warehouse of this size can be rented for as little as AED 92 (USD 25) per year. The expected return on investment for this type of property is 6-7%.
Hotel Apartments
In the UAE, purchasing hotel rooms is a relatively recent initiative. Investors can buy a hotel apartment, then rent it out to visitors for the agreed upon fee. In this instance, the hotel serves as the investor’s management company and oversees every step of the procedure.
Because they have access to a wide range of hotel amenities, hotel guests pay high rates for even brief stays.
There are also investments that allow investors to use the property for their own purposes, though this is typically only permitted for a set number of days each year.
The best investment plan, however, involves renting out a room all year long without using the investor’s personal use allowance.
The main advantage of serviced apartments is that they produce higher rates. For example, the starting price for a 1-bedroom hotel apartment in a 4-star Citadines Metro Central Dubai is AED 450K (USD 123).
The apartment has one bathroom and is 660 square feet in size. ft. The ROI is estimated to be around 5%. During the year, investors will also receive a two-week stay in a hotel.
Swimming pools, a fully equipped gym, sauna and steam room, a children’s playground, CCTV, and high-speed internet access are all available.
8. Pay-off High-interest Debts
Your high-interest debt may jeopardize your efforts to earn a return on your investment. As a result, you must pay off this debt as soon as possible. Pay off your high interest debt to save money.
For example, suppose you have a credit card with a 15% interest rate and a balance of $10,000. Paying off this debt is equivalent to receiving a 15% return on the balance. Here are some tips to help you get there.
9. Endowment Plans
Insurance-cum-saving and investment plans are other names for endowment plans. Endowment plans serve as profit-yearning plans in addition to conventional life insurance plans.
A regular premium is paid under an endowment plan, and part of it is used to build your life insurance benefit and part can be used to save for retirement or build a savings account.
You should also be aware that once the policy term has passed, the money you have saved up may be redeemed.
Additionally, one benefit of endowment plans is that, even if the life insurance death benefit expires, you can still have a corpus at the end of the tenure.
Furthermore, endowment plans are a very safe investment choice in the UAE – ideal for those who can’t take enormous risks. That is why it is one of the best investment options in UAE.
In essence, it is the ideal savings option and investment in the United Arab Emirates for goal-based investments to increase retirement savings and provide for dependents in the future.
10. Unit Linked Insurance Plans
Unit-Linked Insurance Plans, commonly referred to as ULIPs, are another type of investment-cumulative-savings plan that allows for investment flexibility.
However, you must invest a predetermined lump sum amount when purchasing a unit-linked insurance plan.
Furthermore, when you pay the premium for these plans, a portion goes toward the life insurance premium, and the remainder is used to create a corpus for UAE investment purposes.
In addition to this benefit, you have full discretion in selecting your UAE investment options and switching investment funds while the plan is in effect. You can also change between different investment options.
Unit-linked insurance plans have a higher risk than endowment plans because they give you access to high-return investment options in the United Arab Emirates.
11. Retirement and Pension Plans
Pension plans are the best investment options in UAE if you are looking ahead of your retirement. Retirement and pension plans were traditionally employee-benefit plans managed by employers. Additionally, employers used to consistently contribute to a fund.
The employees were then given a regular payment, or pension, from this corpus.
However, employer-funded pension plans are essentially nonexistent in the current environment. Nowadays, retirement or pension funds are ones that people create on their own.
For instance, if you set aside a certain amount of money for retirement, it will be returned to you as a pension when you retire.
In general, there are many financial institutions, insurance companies, and investment firms in the UAE that provide pension plans for retirement.
12. Child Investment Plans
These UAE child investment plans, which are also frequently referred to as child insurance plans, are created to guarantee your children’s financial security.
Parents purchase child investment plans for their kids, grow the corpus, and make recurring premium payments for the plans.
Payments are arranged for every milestone your child reaches after this premium is collected. However, some kid-friendly investment plans also pay out when they mature.
However, parents who purchase the plan have the option of choosing between a lump sum and a periodic payout. These payment plans are largely determined by the company that administers your plan.
13. Money-Back Plans
Money-Back Plans are yet another type of investment plan available in the UAE that combines insurance and investment benefits that is why they are considered the best investment options in UAE.
Money-back plans are essentially capital-guaranteed return investments combined with insurance plans.
Traditional term insurance policies such as Money-Back Plans provide death benefits in the event that the insured person passes away during the policy’s term. A money-back insurance plan also provides the return at predetermined intervals throughout the duration of the policy.
Additionally, “survival benefits” refer to the payouts that the insured person receives at specific intervals. Money-back plans are some of the best-guaranteed income investment-cum-insurance plans, even though some liquidity is still present.
14. Annuity Investment Plans
For those in the UAE who still have at least 10 to 20 years before retirement, annuity investment plans are a fantastic and best investment options in UAE.
Additionally, life insurance companies and investment firms primarily offer annuity plans in the UAE. When enrolling in an Annuity Investment Plan, you make an initial lump sum investment.
Then, these funds are invested in additional UAE investment endeavors by the insurance and investment firms in the UAE.
Additionally, Annuity plans have a lock-in period during which you are unable to withdraw your funds. The insurance provider pays the insured party when the plan matures using the earnings on their investment.
The payments, however, can be made all at once or over time. If you take your investment out before the lock-in period is over, fees might be charged.
Deferred and immediate annuity investment plans are the two types of annuity plans. Investments in deferred annuities have a longer lock-in period.
Immediate annuity plans, as their name suggests, begin paying almost immediately after you invest your money. Consequently, depending on your needs for investments, you can select either of these options.
15. Fixed Deposit Accounts
Banks and other financial institutions in the UAE provide fixed deposit accounts, one of the safest investment options. Fixed deposit accounts, as their name implies, hold your money for a predetermined amount of time.
As our parents have always told us, FDs are the safest option. Additionally, you receive interest on your savings at the banks’ predetermined rates.
A penalty might be imposed if the amount deposited in a fixed deposit account is withdrawn before the maturity period.
Fortunately, fixed deposit accounts have returns that are guaranteed and come with zero risk.
Final Thoughts
The UAE offers excellent investment opportunities, particularly for the short-term investor. Before deciding on one, you should consider two factors: how long you want to invest for and how risky you want your investment to be.
One advantage of a short-term investment is the ability to access your funds when you need them. Furthermore, you can select the type of payout that best meets your needs, such as receiving interest payments twice a year from bonds or converting your returns into cash at the end of the investment period.
Spend time seeking advice from a specialist to make an informed decision. This is the best way to find the best investment options in UAE from which to choose.
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Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.
