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We are aware that living together is illegal. But what actually happens if it becomes an issue? Warned / deported / jail?
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Jail.
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Have also been told Sharjah is not a nice place to live
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It's a dry emirate, so no booze is sold w/ the odd and unexplicable exception of the Sharjah Wanderers-a rugby club w/ pool, crappy gym, and loads of expats that never seem to leave. Sharjah is the most conservative of the emirates, so absolutely no shorts, no sleeveless tops, nothing clingy (better to go w/ a 3/4 length sleeve) for women. No kissing in public-I would avoid holding hands, too. Sharjah has more Arabic speakers residing there (many from around the middle east chose Sharjah), too. Not nice to live in? Well, the traffic is, if anyone can believe this, worse than Dubai. The beaches are nothing to write home about (we always went to Dubai or a hotel in Ajman), either. Still, living in Sharjah has more of the experience of living in a foreign country that Dubai does, IMHO(done both emirates). I have friends who landed jobs in Sharjah 15 years ago and have never left (or moved over to Ajman).
I suppose it depends on what your tastes are and why you are moving to the UAE.