Buyer's Guide

The desire to live in “a place of my own” is a dream for the majority of Dubai expats. Traditionally, the city only permitted the renting of homes for the expat population, leaving them with limited options. Following the introduction of freehold properties, buying a home in Dubai became an aspiration within reach for many.

In the past, as a result of high property prices, purchasing a home in Dubai was not widely achievable. However, with the creation of affordable mid-market housing options coupled with prices steadily declining to more attractive entry points, it now makes financial sense to buy as opposed to rent in the current market. Not only are monthly mortgage repayments less than monthly rents in some instances, there is also the added advantage of capital growth on your asset.

That said, accurate knowledge of the true costs associated with a home purchase, beyond simply the monthly loan payment, is vital information for buyers to have ahead of time in order to make an informed financial decision. There are multiple charges levied by government agencies such as the Dubai Land Department (DLD), real estate agents or developers, mortgage lenders and conveyancers. These are outlined below.

Government Fees

In Dubai, all purchases must be registered with the DLD within 60 days of the transaction, If they don’t register their transaction within 60 days, the purchase will be void. In theory, the 4% DLD charges should be divided 50/50 between the buyer and the seller, though in practice, the buyer pays the entire 4% to the DLD. The buyer also bears the cost of the Property Registration Fee. When the home is purchased via a bank loan, the buyer must also pay an additional fee of 0.25% of the total loan amount to the DLD to register the mortgage against the property. For a cash buyer, this expense is not applicable.

Agency Fees

While engaging the services of a real estate agent will raise your property buying cost by 2% plus VAT, (payable on completion of the deal) having the right agent can make your transaction much smoother. Working with a qualified agent ensures you receive the best advice throughout your journey from the Dubai property market to the community you are buying in, or the developer of the property. An agent also assists with the entire buying process end-to-end, ensuring you are well informed along the way and understand the related costs. Conveyancing fees are another cost applicable to the buyer. Appointing a licensed conveyancer will ensure that all documentation, contracts and financial arrangements associated with the transaction are legally in order.

Conveyance fee is another cost applicable to the buyer when conveyancer services and support are used. The amount ranges from AED 6,000 to AED 10,000. A conveyancer ensures all the legal terms and contracts are accurately written as per the UAE law, protecting the interests of all parties involved.

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Mortgage Fees

For buyers completing their purchase with a mortgage, the above fees are payable to the bank. Some banks allow buyers to add these upfront costs to their mortgage to ease the burden of the initial financial outlay.

It’s also important to note that when purchasing a property where the seller has a mortgage registered, the buyer will first need to pay out the sellers mortgage to receive a No Objection Certificate (NOC) in order to process the property transfer with the DLD. The NOC, which is 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.

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Initial Deposit

For both primary and secondary market transactions, the buyer is required to pay a deposit to secure the purchase. For ready property purchases in the secondary market, the initial deposit is typically 10% of the purchase price payable to the seller via cheque. This amount is collected by the authorised agent (a RERA registered broker) who holds the deposit until the property is successfully transferred. Again, where an existing mortgage is registered against the property, the buyer must first pay out the mortgage to apply for a No Objection Certificate (NOC) to obtain the Title Deed for the property.

Service Fees

Once the transaction has settled and the property ownership has been transferred, there is an additional expense to consider – service fees. Annual maintenance charges on a property are payable to the Dubai Land Department based on the RERA Service Charge and Maintenance Index. This index determines a specific charge per square foot and varies by community. Up to date fees can be sourced directly from the DLD’s website. This amount contributes towards the upkeep of common areas of a building or community, for example elevators, landscaping, security, swimming pools, etc.

Insurance Fees

Home insurance is not compulsory in Dubai, however it is recommended. Home and contents insurance offers protection from potential loss or damage due to theft, accidents, fires or natural disasters.

Life insurance is mandatory when taking out a mortgage in the UAE. Life insurance premium payments are an ongoing cost of mortgaged home ownership that should be factored in to your budget. For the majority of banks it’s charged monthly, separate to the loan. Banks generally charge between 0.4% to 0.8% per annum on the decreasing mortgage balance, and some banks will require the policy be paid for in full for the year. Typically, banks have their own in-house life insurance policy underwritten by major international life insurance companies. But in most cases, selecting an external life insurance policy can be considerably cheaper; especially if you are young and healthy. Cases and circumstances vary and the bank, or other mortgage provider, would be able to advise you of your options.

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