Hidden Cost of Buying a Property in Dubai

Dubai is one of the most sought-after locations in the world. Many people from all over the world dream of purchasing property in Dubai as the city offers plenty of business and job opportunities, state-of-the-art infrastructure, a lavish lifestyle, and good security. Prices of properties vary in different districts of Dubai due to amenities, floor plans, and property structure.

Many people buy and sell properties in Dubai regularly, and first-time buyers need to learn about the hidden costs that come in addition to the property price. In this blog, you can see the hidden cost, which comes in addition to the actual price of the property in Dubai.

Government Charges

All types of properties bought in Dubai must be paid through the Dubai Land Department (DLD). Every property transaction must be filed with the Dubai Land Department within 60 days, or the transaction will be deemed invalid. The Dubai Land Department fee is 4% of the purchase price + AED 580 admin fee for apartments and offices, AED 430 for land, or AED 40 for off-plan. In theory, this 4% fee should be split 50-50 between the buyer and the seller; however, in practice, the buyer generally covers it up. 

The Dubai Land Department also charges a Property Registration Fee. This fee is split into the following:

• For properties valued below AED 500,000: AED 2,000 +5% VAT.
• For properties valued above AED 500,000: AED 4,000 + 5% VAT.

The buyer must also cover the Mortgage Registration Fee if he purchases the property via loan. This fee amounts to 0.25% of the loan amount. 

Agency Services Charges

Getting services from a real estate agent or a real estate firm to buy or sell your property can also add cost to the already expensive transaction. Whether you want to rent or buy a property, availing agency services can be very beneficial but will add up the cost. A real estate agent usually charges 2% of the purchase price + 5% VAT, depending on the kind of property. The conveyance fee is only charged if conveyancer services are acquired during the transaction and can range from AED 6,000 to AED 10,000.

Mortgage Charges

There are two types of Mortgage Charges which are the following:

• The Bank Mortgage Arrangement Fee is 1% of the loan amount + 5% VAT.
• Property Valuation Fee which ranges from AED 2,500 to AED 3,500 + 5% VAT.

The above fees should be paid to the bank by the buyer completing their purchase with a mortgage. It is also important to note that when purchasing a property where the seller has registered a mortgage, the buyer must pay off the current mortgage to receive a No Objection Certificate (NOC) to start the property transfer process with the DLD. The NOC, 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.

Insurance Charges

Insurance charges are also considered as hidden costs when buying a property in Dubai. The owner’s coverage is not mandatory in Dubai, but it does provide a safeguard against the events of theft, natural disaster, damage or any accidents. Meanwhile, when applying for a mortgage, life insurance is mandatory. It varies from company to company and different insurance plans and can be paid on a monthly or yearly basis. 

• The Home and Content Insurance Charges can cost up to AED 1,000. 
• The Life Insurance Charges can cost approximately 0.4 – 0.8% per annum on the decreasing loan balance.

Security Deposit

The buyer is obliged to post a refundable deposit for protection. The deposit is refunded after the property is handed over to the buyer. It costs 10% of the entirety of your cost of selling, which is gathered by a RERA Accredited agent, ensuring that your money is fully protected and will be repaid when the time comes.

Services Fee

As the transaction is done and the property is handed over, another expense comes as the Services Fee. Annual maintenance charges on a property are payable to the Dubai Land Department based on the RERA Service Charge and Maintenance Index. This index measures a specific charge per sq. ft. and varies from community to community.

FAQs

Up-to-date fees can be sourced directly from the Dubai Land Department’s website. This amount is used for the upkeep of common areas of a building or community, for example, elevators, landscaping, security, swimming pools, etc.