Revealed: Total cost of buying real estate in Dubai

The allure of Dubai’s real estate market is unmistakable, with its luxurious skyscrapers and expansive villas drawing in investors and homebuyers from across the globe. However, understanding the full spectrum of costs involved in property transactions is crucial for anyone considering a purchase in this vibrant city. This article aims to demystify these expenses, providing a comprehensive guide to the various fees, charges and the entire cost of buying a property in Dubai.

TOTAL COST OF BUYING A PROPERTY IN DUBAI

Whether you’re eyeing a sleek downtown apartment or a sprawling beachfront villa, it’s important to budget for more than just the property’s listed price. From government and administrative fees to maintenance and insurance costs, we’ll delve into each category, breaking down the expenses incurred for all properties sold in Dubai, so you can make an informed decision.

Whether you’re interested in buying apartments in Dubai or a villa, this guide will help you navigate the complexities of the Dubai real estate market, ensuring a smoother and more transparent property purchasing experience.

Total cost of buying real estate in Dubai ranges from 7% to 10% of the property price. Different types of costs include:

• Government and Administrative Fees
• Agent and Brokerage Fees
• Bank and Mortgage-Related Costs
• Property Maintenance and Additional Fees
• Insurance Costs
• Life Insurance for Mortgages
• Initial Purchase Costs
• FAQs

GOVERNMENT AND ADMINISTRATIVE FEES

When buying property in Dubai, a significant portion of the costs comes from government and administrative fees. These fees are mandatory and are set by government authorities to regulate and facilitate property transactions. Understanding these fees is vital to calculate the final cost of property in Dubai.

DUBAI LAND DEPARTMENT (DLD) FEES

Description: A fee levied by the Dubai Land Department for all property transactions.

Amount: 4% of the property’s purchase price.

PROPERTY REGISTRATION FEES

Description: Charged for registering the property under the new owner’s name. These charges apply to both apartments and villas for sale in Dubai.

Amount:

• Properties below AED 500,000 will cost AED 2,000 + 5% VAT
• Properties above AED 500,000 will cost AED 4,000 + 5% VAT.

MORTGAGE REGISTRATION FEES

Description: Applicable if the buyer gets a mortgage in Dubai to purchase the property.

Amount: 0.25% of the mortgage amount + AED 290.

LEGAL AND DOCUMENTATION COSTS

Description: Covers the costs for documentation required during the transaction.

Amount: Varies, but includes expenses like AED 520 for the Title of Deed

These fees constitute the basic government and administrative charges and can significantly impact the overall cost of buying a property in Dubai. It is important for buyers to budget for these fees to ensure a smooth transaction process.

AGENT AND BROKERAGE FEES

Agent and brokerage fees are another crucial cost factor when purchasing property in Dubai. These fees are paid for the services of real estate agents and brokers who facilitate the buying process.

REAL ESTATE AGENT COMMISSION

Description: This fee is for the services provided by real estate agents, who assist in finding the property, negotiating the price, and guiding through the purchase process.

Amount: Generally, 2% of the purchase price + 5% VAT.

CONVEYANCE FEES

Description: For legal transfer and conveyancing services, ensuring all legal terms and contracts are accurately written as per UAE law.

Amount: Typically ranges from AED 5,000 to AED 10,000.

These fees vary based on the value of the property’s value, the complexity of the transaction, and the level of service provided. It’s essential to factor in these costs while budgeting for a property purchase in Dubai.

BANK AND MORTGAGE-RELATED COSTS

For buyers who choose to finance their property purchase through mortgage instead of cash, there are several additional costs to consider. Banks sometimes provide special discounts as promotions for waiver or reduced mortgage arrangement fee and property valuation fee. 

BANK MORTGAGE ARRANGEMENT FEE

Description: Fee charged by the bank for arranging the mortgage.

Amount: Typically 1% of the loan amount + 5% VAT.

PROPERTY VALUATION FEE

Description: A fee for the valuation of the property, which is a requirement for mortgage approval.

Amount: Usually between AED 2,500 and AED 3,500 + 5% VAT.

NO OBJECTION CERTIFICATE (NOC) FEE

Description: Required when purchasing a property with an existing mortgage. It’s a legal certificate stating all dues are cleared.

Amount: Ranges from AED 500 to AED 5,000.

These costs are pivotal in the mortgage process and can vary based on the loan amount and the bank’s policies. Prospective buyers should consider these fees when planning their finances for a property purchase in Dubai.

PROPERTY MAINTENANCE AND ADDITIONAL FEES

Owning property in Dubai also involves recurring costs for maintenance and additional services. Some call this the hidden cost of buying property in Dubai.

ANNUAL SERVICE CHARGES

Description: Fees for the upkeep of common areas and services in a residential community or building.

Amount: Determined by the RERA Service Charge and Maintenance Index, varies per square foot and by community. Service charges are generally paid on a quarterly basis. Apartments have a higher service charge per square foot as compared to villas and townhouses.

DEWA FEES

Description: Charges for setting up electricity and water connections by Dubai Electricity and Water Authority.

Amount: Ranges from AED 2,000 for an apartment to AED 4,000 for a villa.

These fees are essential for the ongoing maintenance and functionality of the property and can fluctuate based on various factors. These are extra costs the buyer should factor into the overall budget.

INSURANCE COSTS

Insurance is a critical consideration for property buyers in Dubai, offering protection and peace of mind.

HOME AND CONTENTS INSURANCE

Description: Covers potential loss or damage to the property and its contents.

Amount: Approximately AED 1,000, though it varies based on the property’s value and contents.

LIFE INSURANCE FOR MORTGAGE

Description: Mandatory for mortgage holders, ensuring loan repayment in unforeseen circumstances.

Amount: Generally 0.4-0.8% per annum on the decreasing loan balance.

While not all insurance types are compulsory in Dubai, they are highly recommended to safeguard your investment and fulfill mortgage requirements.

INITIAL PURCHASE COSTS

The initial purchase costs are crucial for securing a property in Dubai and vary based on the market (primary or secondary) and property type.

INITIAL DEPOSIT

Description: A security deposit submitted to the real estate brokerage generally in the form of a cheque to secure the property purchase. The cheque is drafted in the name of the property seller.

Amount: Typically 10% of the purchase price for ready property purchases in the secondary market.

This initial deposit is a key component of the buying process, acting as a commitment to the purchase and securing the property until the remaining formalities are completed.

KEY TAKEAWAYS ABOUT BUYING A PROPERTY IN DUBAI

• Diverse Range of Costs: Buying property in Dubai involves various fees, including government and administrative charges, agent fees, and mortgage-related expenses.
• Government Fees are Substantial: The Dubai Land Department fees, registration fees, and mortgage registration fees significantly add to the property cost.
• Agent and Brokerage Fees are Essential: Hiring real estate agents and conveyancers, while optional, adds value but also increases the overall cost.
• Maintenance and Additional Fees are Recurring: Annual service charges, DEWA fees and maintenance costs are ongoing expenses for property owners.
• Insurance Provides Security: While not always mandatory, insurance such as home and contents, and life insurance for mortgages is important for protection.
• Initial Deposit is Crucial: A substantial initial deposit is required to secure the property, especially in secondary market transactions.
• Comprehensive Budget Planning is Key: Understanding and budgeting for these varied costs is essential for a smooth property purchase in Dubai.

FAQS ABOUT COST OF BUYING A PROPERTY IN DUBAI

What is the Dubai Land Department (DLD) fee?

The Dubai Land Department fee is 4% of the property purchase price.

Are there any registration fees for property in Dubai?

• Below AED 500,000: AED 2,000 + 5% VAT
• Above: AED 4,000 + 5% VAT

Is a mortgage registration fee required in Dubai?

Yes, mortgages in Dubai typically charge 0.25% of the mortgage amount + AED 290 as registration fee.

What are the legal and documentation costs?

These vary, including fees like AED 520 for Title of Deed.

How much is the real estate agent commission?

Generally, 2% of the purchase price + 5% VAT.

What does the conveyance fee cover?

It covers legal transfer services, typically AED 6,000 to AED 10,000.

Are there bank mortgage arrangement fees?

Yes, usually 1% of the loan amount + 5% VAT.

What is the property valuation fee for a mortgage?

Between AED 2,500 and AED 3,500 + 5% VAT.

Is NOC fee mandatory for mortgages?

Yes, it ranges from AED 500 to AED 5,000.

What are annual service charges for?

They cover upkeep of common areas, calculated per square foot.

How much are DEWA fees for a new connection?

Around AED 2,000 for an apartment and AED 4,000 for a villa.

Are there any hidden cost of buying a Dubai property?

Costs like insurance and maintenance fees are often overlooked.

How does VAT apply to property purchases?

VAT applies to services like agent commission and legal fees.

Is a down payment different from the initial deposit?

Yes, the down payment is part of the mortgage process and separate from the initial deposit.

Are there any extra charges for off-plan properties?

Yes, like the Oqood Certificate fee for AED 5,250.

If I buy property without a mortgage, how would it impact the cost of buying a property in Dubai?

Some fees, like mortgage registration and property valuation, will not apply.

Is it cheaper to buy directly from a developer?

It can be, as it often avoids certain broker fees.

Do service charges vary across different communities?

Yes, these charges are based on the RERA Service Charge and Maintenance Index, which varies for each property type and community.

As you can see, multiple aspects can affect the cost of a house in Dubai. When planning your budget, you have to factor in the total cost of buying property in Dubai. Depending on individual circumstances, these fees can be higher or lower. Nevertheless, you should now have a rough estimate of all the fees for buying real estate in Dubai.