Dubai’s real estate market has become a lucrative investment opportunity that many investors are eyeing. With a rapidly growing market and billions of dollars being invested in the development of the UAE and Dubai, owning a Dubai property is a nice thing to have and might prove to be a great investment in the long run. But when purchasing this property, buyers should not look at the price of a property thinking that this will be the only money they have to pay.
When buying a property, it does not matter if it is in Dubai or any other country, you should expect to pay some additional fees. Dubai real estate buying fees consist of a few charges that you have to pay to different parties such as the government, real estate agents, and banks. Below we will take a look at these fees in order for you to have a clear understanding of what to expect when buying property in Dubai.
Types of fees you will need to pay when buying Dubai real estate
- Government fees
- Agency fees
- Mortgage fees
- Insurance fees
- Initial deposit
- Service fees
Possible Dubai real estate fee types
When we are purchasing a property, especially one in a foreign country, we should expect to be paying some fees associated with the purchase. When it comes to the UAE and Dubai, there are 6 main fees that you are expected to pay, and below we will take a look at each of these fees.
When it comes to government fees, there are multiple of these fees that buyers should expect to pay. Firstly, there is the Dubai Land Department fee, which needs to be paid within 30 days of purchase. By law, each property should be registered with DLD and you will need to pay 4% of the purchase price as a fee. It is said that this fee should be split between buyer and seller, but commonly buyers are the ones who pay the whole fee. There is also a separate registration fee which is AED 2000-4000 + 5% VAT based on the price of a property. And lastly, if this purchase is made using a mortgage from the bank, a buyer should pay 0.25% of the loan amount to the DLD.
When purchasing real estate in Dubai, it is highly recommended that you use a real estate agency when making a purchase, therefore you should expect to pay some Agency fees. The amount you will be required to pay will depend on the agency you are using, but in general, these fees are around 2% of the purchase price +5% VAT. There is also a Conveyance fee that makes sure that the whole transaction goes smoothly and every party is happy. This Conveyance fee is around AED 6,000 to AED 10,000 depending on the price of the property.
While purchasing real estate in Dubai, you might not have the necessary money on hand and will need to take out a mortgage in order to acquire the property. Because of this, fees in Dubai real estate when using a mortgage is something that is unavoidable. This fee is 1% of the purchase price plus the traditional 5% VAT. There is also a property valuation fee that banks charge and it ranges between AED 2,500 and AED 3,500.
Dubai real estate expenses also consist of insurance fees that buyers should pay. When buying a house in Dubai, it is not mandatory to have insurance on the house, but it is highly recommended to take one as it protects you from damages such as fire, earthquake, and other natural disasters, it also protects you from theft and robberies.
There is also life insurance, which is mandatory if you took out a mortgage. Banks usually charge 0.4 – 0.8% of the mortgage amount each year for life insurance, meaning that as you pay out your mortgage and it decreases, the life insurance fee also decreases. These Dubai real estate fees should not be concerning, especially if you are a young healthy individual, as life insurance fees, in that case, are relatively low.
Another type of fee buyers need to pay when buying property in Dubai is an initial deposit. It does not matter if you are purchasing a property from developers or the secondary market, it is mandatory to pay the initial deposit in order to secure the purchase. This real estate fee in Dubai is usually 10% of the purchase price and it is paid by cheque to the authorized agent. This agent then holds on to the deposit until the purchase is finalized.
If you are purchasing the property from the secondary market and this property is under a mortgage, you are then required to pay out the mortgage in full and it does not transfer. Only after this can you sign the No Objection Certificate and finalize the purchase.
Lastly, you are expected to pay service fees once the purchase is finalized and you own the property. These service fees are fees you pay for keeping the property and the surrounding community clean and operational. It includes elevators, cleaning of the building and surrounding areas, security, and other similar services. The fees you have to pay here will depend on the size of your property and the area it is located in, with more luxury communities having higher fees. You can check the exact fees on the DLD website or ask the seller for exact information, but you should not expect to pay much.
Final thoughts on Dubai real estate fees
Fees are something that tries to remain hidden and show up in the end. In Dubai’s real estate markets case, there are quite a few fees that need to be considered. There are property registration fees in Dubai that you pay to the government, there are real estate agency fees, as it is highly recommended to use a real estate agent when purchasing a property, and there are fees such as insurance, initial deposit, mortgage, and service fees. While this seems like a lot of fees, this is typical when purchasing real estate in any country. Therefore, when purchasing real estate in Dubai, always take these fees into consideration and plan your finances according to them and not only according to the price of a property.
Frequently asked questions about Dubai real estate fees
In Dubai, you have to pay 4% of the purchase price to the Dubai Land Department as a fee for the purchase and an additional AED 2000-4000 +5% VAT for registration. Other than that, there are no more registration fees, but there are additional fees you have to pay to agencies, sellers, and banks.
Dubai is a tax-free emirate, meaning that there are absolutely no taxes in this place. What this means is that when buying a property you should not expect to pay any taxes whatsoever. But this does not mean that you will be paying only the property price, as there are fees that come with purchasing a property in Dubai.