Over the past ten years, Dubai's real estate market has developed significantly, both in the residential and commercial sector. In the past two years however, there can be no doubt that the market has been booming. This boom has resulted in a significant increase in rental prices around the Emirate and that factor, along with the "buy to stay" mindset has resulted in a significant increase in people buying properties themselves rather than rent. The first half of 2024 saw a 30% rise in property transactions over the previous year (as reported by Property Monitor).
Despite this growth and boom, the Dubai Land Department (DLD) fees and other related government fees have remained largely unchanged over the past 10 years which has certainly helped with the growth of the real estate market, as they remain comparatively lower than other jurisdictions.
We will address the typical various fees when purchasing and renting properties in this article.
Purchasing
It must be noted that the sale price of a property is not the only cost associated with the purchase and there are numerous other costs associated with purchasing a property.
These fees include
- Government and agency fees such as DLD fees, property registration fees, the legal documentation costs and Mortgage Registration fees if applicable.
- In addition, there are the brokerage and conveyance fees, as well as bank fees (if a mortgage is taken).
For the purpose of example, we shall use a property with a sale price of AED3,000,000.
DLD Fees
The largest additional government fees when purchasing a property is likely to be the DLD fee.
The DLD fee is payable upon transfer of the property into your name from the previous owner's name and amounts to 4% of the property price. This kind of fee is commonly charged in various countries when acquiring property. Technically, the seller and buyer should split the DLD fee by each paying 2% of the property price, however in practice it is usually the buyer that pays the full 4% DLD fee.
As such if your property price amounts to AED3,000,000 you will pay the DLD a fee of AED120,000 at the transfer of the property.
As mentioned, this fee has not changed over the past 10 years and when speaking to one of our clients, a top real estate broker in the luxury sector in Dubai, her opinion was as follows:
"The Dubai real estate market has seen remarkable growth over the past decade, with rapid expansion across both residential and commercial sectors. Despite this impressive development, the (DLD) transfer fee has remained at just 4%, which is significantly lower than in other major global cities such as London and Paris where is usually exceeds 7%. This comparatively low fee continues to make Dubai an attractive option for investors looking for opportunities in one of the world's most dynamic property markets. I also remember a time not very long ago where developers use to offer to pay the registration fee on behalf of the purchaser as a way to promote their projects. This disappeared or became very rare in today's market".
Inga Brykulska, Driven Forbes Properties
Accordingly, whilst in the past some waivers have been made for the DLD fee, it is rare in the current real estate boom that Dubai is experiencing and still, this comparatively lower fee than other jurisdictions, is certainly helping support the boom.
Property Registration Fees
In addition to the DLD fees you are required to pay the Property Registration Fees which are as follows:
- Properties below AED 500,000 will cost AED 2,000 + 5% VAT
- Properties above AED 500,000 will cost AED 4,000 + 5% VAT.
Given that the property in the example is AED3,000,000, this will be a fee of AED4,250 (incl VAT).
Mortgage Registration Fees
These fees are only applicable if the buyer relies on a mortgage, but for the purposes of our example, we are assuming that the buyer has indeed had to rely on a mortgage for buying the property.
The Mortgage registration fees in Dubai amount to 0.25% of the Mortgage amount +AED290.
Assuming the buyer in our example placed a deposit of 20% (AED600,000) down on the property when applying for the mortgage, the total mortgage amount will be AED2,400,000.
Accordingly, the mortgage registration fee will amount to AED6,000+AED290 which amounts to AED6,290.
Legal Documentation costs.
This fee covers the costs for the required documentation needed for the transaction. Depending on the circumstances and the legal documents required the fee can vary but will include expenses for the Title Deed which amounts to AED580.
The above fees constitute the government and administrative charges when purchasing a property however there are further additional fees.
Agent and Conveyance fees.
These are the fees payable to the agent and broker for finding a property and guiding you through the process.
The Real Estate Agreement commission may vary depending on pre-negotiation but is generally around 2% of the purchase price plus 5% VAT. On a AED3,000,000 you are looking at AED60,000 + VAT which totals AED 63,000
The conveyance fees are for the conveyancing services provided by the broker for the transfer of the property and can vary based on the transaction value as well as the complexity involved, but generally range from AED5,000 to AED10,000. We shall use an average of AED7,500 for calculation purposes.
As highlighted above, there are additional government fees pertaining to mortgages but there are further additional non-governmental fees pertaining to mortgages.
Bank Mortgage Arrangement Fee.
This is a fee the bank charges for procuring the Mortgage.
Banks may have special deals on this and may charge nothing but in the absence of such a deal, this is typically 1% of the loan amount + VAT.
As per the above, if the buyer placed a 20% deposit down on the AED3,000,000 property, the loan would be AED2,400,000 and the Bank Mortgage Arrangement Fee would amount to AED24,000 + VAT which amounts to a total of AED25,200.
Property Valuation Fee
This is also a fee that applies when a buyer takes a mortgage. A valuation of the property is a requirement for mortgage approval and usually ranges between AED2,500-AED3,500 + VAT. (AD2625-AED3675). We shall use an average of AED3,150 for calculation purposes.
No Objection Certificate (NOC) Fee
This is required when purchasing a property with an existing mortgage and confirms the mortgagor has no objection to the transfer of the property. The amounts can vary from anything between AED500-AED5,000. We shall use an average of AED2,750 for calculation purposes.
Accordingly, when taking the above example into account with the charges the final payable amount goes from AED3,000,000 to approximately AED3,232,720.
In addition, as highlighted above, for mortgages, you are generally required to pay a deposit of 20%. This can vary depending on the bank and developer and any specials available and can be as low as 10%, but typically 20% is required.
As such to buy a property of AED3,000,000 on mortgage, you are looking at approximately AED832,720 being required in cash (or additional finance) before being able to finalise acquisition of the property.
Rental
For some, buying property remains unattractive or unfeasible and in such cases, they will rent the property.
The fees associated with renting property are far less onerous than when purchasing a property.
They are as follows for the government fees
Housing fees or Dubai Municipality fees 5% of the annual rent split into 12 equal parts and added to the Dewa Bill.
Ejari fee which amounts to approximately AED220, which is paying upon yearly renewal of Ejari.
In addition, there are the following fees:
- Security deposit- This is generally 5%of the annual rent but can go up to 10%.
- Agency fees – usually 5% + VAT of the annual rent.
As can be seen from the above, there are numerous fees to consider when completing a property transaction but especially with purchasing a property. For regular buyers, these fees will not be a surprise as they haven't materially changed in the past decade, however first-time buyers should prepare themselves for the additional fees when purchasing a property.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
