UAE: Five additional costs you should budget for when purchasing property in Dubai (2024)
Beyond purchase price, you need to factor in agent, mortgage fees and more
Dubai: Congratulations! You have just purchased your first home in Dubai. But while you may have seen the property’s price, to make sure it fits your budget, there are a few additional costs you will need to also keep in mind, to complete the purchase. Understanding these extra expenses, beyond the property's purchase price, can help you budget for the entire process and Gulf News spoke to two Dubai-based real estate experts, who broke down these costs.
1. Security deposit
To secure your purchase you need to provide an initial deposit of 10 per cent of the property purchase price, according to Thomas Poulson, sales director at haus and haus Real Estate.
“The deposit is held in an escrow by the real estate agent selling the property and is returned to the buyer subject to the clauses in the contract. If the sale successfully transfers, it is returned to the buyer on the same day,” he said.
A security deposit cheque, equivalent to 10 per cent of the property's purchase price, is put down to secure the property and is held in escrow by the real estate agent selling the property. It is returned to the buyer subject to the clauses in the contract; if the sale is successfully completed, it is returned to the buyer on the same day.
Source: Investopedia
2. Dubai Land Department (DLD) fees
According to Poulson, before you finalise a property purchase, you should also budget for the following government-related charges to complete the transaction:
- Dubai Land Department Fee
“Equivalent to four per cent of the purchase price plus the administrative fee of Dh580 for a completed property that has a title deed, or Dh40 for an any property that has an Oqood, and not been issued the title deed – typically off-plan properties,” he explained. Oqood is an intial sale contract or certificate issued by DLD for off-plan properties.
- Property registration fee
According to Poulson, these are the property registration fees you can expect:
• Dh2,000 plus Value Added Tax (VAT) – if the property is below Dh500,000
• Dh4,000 plus VAT for properties above Dh500,000
• Dh5,000 plus VAT for off-plan properties, or ready properties that do not yet have a title deed.
- DLD mortgage registration fee
This is only applicable if you are purchasing a property with a mortgage. It is equivalent to 0.25 per cent of the loan amount as well as an administrative fee of Dh290, according to Poulson.
3. Bank and mortgage fees
Poulson explained that if you are purchasing the property with a mortgage, then a minimum down-payment to the bank is required.
“The down payment for a property under Dh5 million is 20 per cent for an expat, or 15 per cent for a UAE national. The minimum down payment for a property over Dh5 million is 30 per cent for an expat or 25 per cent for a UAE national,” he said.
He added that if the buyer is purchasing a second property, then this down-payment may need to be increased as per the lending banks’ policies.
In addition to the down payment, you also need to keep in mind other additional costs like:
• Bank mortgage arrangement fee - This fee is typically one per cent of the loan amount plus VAT.
• Bank valuation fee – This is only applicable when purchasing with a mortgage. The price is set by individual banks, but they typically range from Dh2,500 to Dh3,500.
4. Agent fee
This fee is for the service provided by the real estate agent, who assists in negotiations, facilitates the buying process and guides buyers to make informed decisions. “This agency fee is two per cent plus VAT of the purchase price payable by the buyer,” he added.
5. Service charges
Once you have completed the property purchase and the ownership has officially transferred to you, there is an additional cost you need to consider – the service fees.
“Essentially, it is a recurring fee that homeowners must pay for the maintenance and upkeep of their residential building or area and all its common amenities,” Anthony Joseph Abou Jaoude, a real estate broker and CEO of Prime Stay Holiday Rentals told Gulf News.
According to Joseph, service charges can include several property management aspects such as:
• Cleaning
• Maintenance
• Security
• Landscaping
• Waste disposal
• Repairs
• General upkeep of the property and community
• Management and administration
• Utilities - DEWA
“While service charges in Dubai are applied to any and all kinds of properties in the city, be it residential or commercial, apartments or villa, the fees are dependent on the kind of property and the range of services that are offered in the service contract,” he explained.
While service charges in Dubai are applied to any and all kinds of properties in the city, be it residential or commercial, apartments or villa, the fees are dependent on the kind of property and the range of services that are offered in the service contract.
How much service charge do I need to pay?
There is a pre-determined service charge index in Dubai, provided by DLD, which allows clients and potential property buyers to better understand the approved and accurate service charges and fees for different projects across Dubai.
“This service charge calculator will provide both the minimum and maximum charges of different communities across Dubai. Bear in mind that service charges in Dubai are calculated on a square-foot basis, the price for which can range from Dh3 per square foot to Dh30 or more,” said Joseph.
This service charge calculator will provide both the minimum and maximum charges of different communities across Dubai. Bear in mind that service charges in Dubai are calculated on a square-foot basis, the price for which can range from Dh3 per square foot to Dh30 or more.
Expert advice - get in touch with a mortgage advisor
“If buying with a mortgage, then I would recommend speaking to a mortgage advisor and obtain pre-approval before entering into a sales contract. It is strongly advisable to know how much you can afford when buying a property before you to start looking for one,” Poulson highlighted.
This will help you avoid the disappointment of finding your dream home only to learn it is beyond your budget.
“On the flip side, you might pleasantly discover that you have more funds available than you initially thought. A good mortgage advisor will map out the necessary timescales needed for the sales contract length to ensure that the banks have enough time to process and finalise the mortgage application,” he added.
If buying with a mortgage, I recommend speaking to a mortgage advisor and obtaining pre-approval before entering into a sales contract. It is strongly advisable to know how much you can afford when buying a property before you start looking. This will help you avoid the disappointment of finding your dream home, only to discover it's beyond your budget.
Speak to a reputable real estate agent
Poulson suggested finding a community specialist who can offer suitable properties, provide better insights into local market trends, and share recent transaction data relevant to the buyer's area of interest.
“This way, buyers are more educated on what the actual transaction prices are in the community and can make a more informed decision as to how much to offer on a property, and it also gives you the peace of mind that you have offered a ‘fair’ price,” he said.