What are the costs of buying a property in Dubai?
Dubai is the ruling centre of global business and trade between the eastern and western worlds. Since the introduction of freehold territories, buying a home in Dubai has become an aspiration achievable for many. The property market in this progressive metropolis has been attracting investors for years.
However, the additional costs associated with buying a home, aside from the price, is vital information that buyers should have in advance to make an informed financial decision.
And yes- properties here are exempt from taxes, except the "acquisition tax" to the government agency- Dubai Land Department (DLD).
If you are considering buying a property in Dubai, here is a detailed list of fees associated with buying a property in the city.
1. Property transfer and registration fees (state fees).
Fees for purchasing a property in Dubai include fees to the Dubai Land Department (DLD). It can be seen as a one-off tax paid to the government. The DLD fee is 4% of the total price of the property. The DLD fees in Dubai are legally split between the buyer and the seller which are 50% each. However, in most cases it is paid in full by the buyer of the property.
Along with the mandatory DLD fees in Dubai, buyers are also required to pay the property registration fees which depend on the value of the property. The buyer also bears the cost of the property registration fee.
- The administration fee to (DLD) is AED 580 (€147) for apartments and offices or AED 430 (€109) for plots or AED 40 (€10) for greenfield properties.
- Property Registration Fee- For properties valued below AED 500,000 (€127,088) the fee is AED 2,000 (€508) + 5% VAT; For properties valued above AED 500,000 the fee is AED 4,000 ( €1017) + 5% VAT
Buyers purchasing a property using bank loans must also pay DLD mortgage recording fees.
- Mortgage registration fees at Dubai Land Department- 0.25% of the loan amount + 290 AED (74 €)
It is important to know that DLD fees must be paid within 60 days or the purchase is cancelled.
2. Agency fees
Although engaging the services of a real estate agent will increase your cost of buying a property, having the right agent can make your transaction much more seamless. An experienced agent can actually help buyers make wise and informed decisions. It ensures you that all the paperwork, contracts and financial agreements related to the transaction are legally sound. Furthermore, this commission is only applicable to secondary sales
(resales). Buying directly from property development companies such as Damac, Emaar you can use a broker to protect your interests absolutely free as they receive commission from the sellers- no matter which one you choose.
-Broker's fee 2% of the purchase price + 5% VAT
3- Guarantee fee:
Approximately AED 6,000 (€1,525) to AED 10,000 (€2,542).
The Conveyancing Fee is another amount applicable to the buyer when using the services of a firm to ensure that all legal terms and contracts are accurately written according to UAE law, protecting the interests of all parties involved. Notaries are the experts who ensure that your documentation and contracts are up to date according to UAE laws.
4. Security deposit
For both primary and secondary market transactions, the buyer is required to pay a deposit to secure the purchase. For completed secondary market property purchases, the initial deposit is usually 10% of the purchase price, payable to the seller by cheque. This amount is collected by the authorized agent (RERA registered broker) who holds the deposit until the property is successfully transferred.
5. Mortgage fees
Buyers purchasing the property through a loan are required to pay the mortgage fees. The mortgage fee is further broken down into mortgage settlement fees, processing fees and appraisal fees.
The main division of mortgage fees:
- Bank mortgage settlement fee 1% of the loan amount + 5% VAT
- Property valuation fee between 2500 AED (635 €) - 3500 AED (890 €) + 5% VAT
For buyers who complete their purchase with a mortgage, the above fees are paid to the bank. Some banks allow buyers to add these upfront costs to their loan to ease the burden of the initial finance costs.
It is also important to note that when purchasing a property where the seller has a registered mortgage, the buyer will first need to pay off the seller's mortgage in order to obtain a No Objection Certificate (NOC) to process the transfer of ownership with DLD. The NOC, which is a legal certificate, states that the seller has paid all service charges and other fees and that the developer has no objection to the sale.
6. Insurance fees
Dubai has not yet made home insurance compulsory, but it is highly recommended for home buyers. It offers optimal protection from potential damage.
Life insurance is compulsory when taking out a mortgage in the UAE.
Insurance fees for buying a property in Dubai are divided into:
Home insurance = 1000 AED per year (approx)
Life insurance = 0.4% to 0.8% of decreasing loan per year (approximately)
Life insurance premium payments are an ongoing cost of owning a mortgaged home that should be included in your budget. Typically, banks have their own in-house life insurance policy underwritten by major international life insurance companies. But in most cases, choosing an external life insurance policy can be significantly cheaper. Cases and circumstances vary and your bank or other mortgage provider can advise you on your options.
7. Property service fee- maintenance fee
Once the transaction is settled and ownership of the property has been transferred, there is an additional cost to consider - property service charges. These fees are paid to the Dubai Land Department based on the RERA maintenance index. This index determines a specific fee per square foot and varies by neighborhood. The current charges can be consulted directly from the DLD website. This amount contributes to the maintenance of common areas of a building or neighborhood, such as elevators, landscaping, security, swimming pools, etc.
8. Charges to electricity and water companies
Another key aspect around the fees for buying an apartment in Dubai are the DEWA fees. The governing body that manages Dubai's electricity and water connections for all households.
The cost to DEWA ranges from AED 2,000 for an apartment to AED 4,000 for a villa, depending on the size.
These are the most common additional costs in the property purchase process. However, there may be several other additional charges for buying property in Dubai depending on the area, type and method of purchase. We can offer a free consultation for all matters related to the Dubai property market. Do not hesitate to contact us.
Dubai is known for its luxury and hospitality. It is a great place to buy exclusive properties at significantly lower prices compared to other popular cities around the world.
And if outstanding infrastructure, a growing economy and growing opportunities in all sectors have convinced you to invest, then the high rental yields, lack of property tax, etc. Financial incentives will contribute to this.
Dubai offers a wide range of properties to suit every budget. The city is definitely raising the bar of luxury living every day. Take a look at our offers.
