The desire to own a house is a dream shared by majority of expats and real estate agent in Dubai. Earlier, the city allowed renting of homes for the expat population only, leaving them with limited options. Dubai, for instance, is an ideal choice for real estate investments with top facilities and the introduction of freehold properties makes purchasing a house in Dubai an aspiration for many people.
The affordable mid-market housing options together with prices steadily declining to more attractive rates makes sense to purchase a home in Dubai. So, the monthly mortgage repayments will be less than monthly rents in some situations and there is also additional benefit of capital growth on your valuable asset.
It is necessary for buyers to understand about additional costs associated with buying a house and various charges levied by the government agencies which include – Dubai Land Department (DLD), mortgage lenders and real estate agent in Dubai. We have piled down a list of the hidden costs of buying and owning property in Dubai to provide in-depth overview of the entire process.
Agent’s fees
Hiring a real estate agent has many benefits but they have charge for their services. The fee of an agent is 2% of the purchase price which may increase the cost along with Value Added Tax remaining due upon completion of the sale. But the right agent will make the transaction process smooth and provide the best advice about Dubai real estate market for buying property.
They will also manage the buying process from the beginning till the end by keeping you informed throughout so that you are aware about all related costs. Besides, it is advisable to appoint a licensed conveyancer who ensures all contracts, documentation and financial arrangements related to the transaction are valid. The carriage charge for these services may range from AED 6,000 to AED 10,000.
Mortgage fees
Those who want to purchase property by taking out a loan must pay mortgage fees in Dubai, which is combination of mortgage arrangement fees, valuation fees and processing fees. If you have to register the mortgage, then you will be required to pay a NOC (No Objection Certificate) fee ranging from AED 500 to AED 5000.
The main components of mortgage fees are mortgage arrangement fees which equal 1% of bank loan amount with 5% VAT. Additionally, the valuation fee of the property may range from AED 2500 to AED 3500 along with 5% VAT. After this, the buyer will pay off present mortgage for a property where the current owner has a mortgage registered. The buyer then gets Non-Objection Certificate (NOC) after the existing mortgage has been paid off. The NOC is obligatory in this case for recording property with the DLD.
Initial deposit
The buyers need to pay certain deposit and secure property purchase in the main as well as secondary real estate market. The first deposit amount is generally 10% of purchase price that has to be paid by check to the seller at the time of purchasing home in the secondary market.
An agent has to be registered with Real Estate Regulatory Agency or RERA who collects and holds deposit till property transfer successfully. For obtaining No Objection Certificate (NOC) and Title Deed for the property, the buyer should pay off outstanding mortgage amount that is recorded against the property. It is noteworthy to know that these demands and procedures may change according to particulars of the transaction.
Transfer fees
The buyers and sellers are protected with certain regulations of the real estate market in Dubai. This will include upfront fees for separating from the property price which differs based on the area and kind of property.
Dubai Land Department (DLD) controls real estate transactions and collects fees from the homebuyers. An important fee is Dubai Land Department or DLD fee, which is 4% of the total property price and divided equally between the buyer and the seller. When you plan for property purchase in Dubai, it is important to pay registration fees for it. This registration fee will depend on property value below AED 500,000 paying AED 2000 + 5% VAT and above AED 500,000 paying AED 4000 + 5% VAT.
If a buyer is taking out a loan to pay for the property, then they will have to pay mortgage registration fees by almost 0.25% of the loan amount with AED 290. It is important that DLD fees should be paid within 60 days or else the purchase will be cancelled.
Service fees
Being a property owner in Dubai, it is necessary to consider annual servicing charges at the time of budgeting for your purchase. It may range from AED 3 to AED 30 or more for each square foot. When the property is being transferred, the buyer will be responsible for annual maintenance expenses, also called service charges. These are paid to Dubai Land Department as per RERA service and maintenance index.
Based on RERA service charge and maintenance index, the charges go towards improving and maintaining the community through elevators, landscaping and security. This is applicable for all kinds of properties including apartments, villas, commercial or retail. The cost of these charges will depend on several factors such as – type of project, the neighbourhood and the purpose for which property has been purchased.
Though it is important to know about the hidden costs, owning a real estate property in Dubai can be a profitable venture. The dynamic real estate in the city provides significant returns whether you plan to rent or sell your property. With the help of thorough planning and right budgeting, you can surely fulfil your dream of owning a property in Dubai.
Thus, drafting an effective plan for purchasing a home is necessary when you are looking to save. It is essential to know the amount needed for making the down payment along with additional costs as many believe they require 20% or less depending on the loan. If you have already started saving or have just begun, there are several options available to save for the down payment. Formulating a budget and discovering ways to increase income or lessen expenses can be of great benefit on your part in the real estate market.
