Dubai: Congratulations on purchasing your first home in Dubai! While you may be aware of the property’s sale price, it’s crucial to consider additional costs to ensure it fits within your budget. Understanding these extra expenses will help you manage the entire buying process effectively. Gulf News consulted with two real estate experts in Dubai to break down these essential costs.
1. Security Deposit
To secure your purchase, you must provide an initial deposit of 10% of the property’s purchase price, according to Thomas Poulson, Sales Director at haus and haus real estate.
“The deposit is held in escrow by the real estate agent selling the property and is returned to the buyer subject to the clauses in the contract. If the sale successfully transfers, it is returned to the buyer on the same day,” he said.
What is Escrow?
An escrow refers to a financial arrangement where a third party holds an asset or money on behalf of two parties completing a transaction.
Source: Investopedia
2. Dubai Land Department (DLD) Fees
Before finalizing your property purchase, budget for government-related charges to complete the transaction, including:
- Dubai Land Department Fee
Equivalent to 4% of the purchase price, plus an administrative fee of Dh580 for completed properties with a title deed, or Dh40 for properties with an Oqood (an initial sale contract for off-plan properties). - Property Registration Fee
These fees are as follows:- Dh2,000 plus VAT for properties below Dh500,000
- Dh4,000 plus VAT for properties above Dh500,000
- Dh5,000 plus VAT for off-plan properties or ready properties lacking a title deed.
- DLD Mortgage Registration Fee
Applicable only if purchasing with a mortgage, this fee is 0.25% of the loan amount, plus an administrative fee of Dh290, according to Poulson.
3. Bank and Mortgage Fees
If you are financing your property with a mortgage, a minimum down payment to the bank is required.
“The down payment for a property under Dh5 million is 20% for expatriates or 15% for UAE nationals. For properties over Dh5 million, the down payment is 30% for expatriates or 25% for UAE nationals,” he explained.
Poulson added that the down payment may need to increase for second property purchases, depending on lending banks’ policies. Additional costs include:
- Bank Mortgage Arrangement Fee – Typically 1% of the loan amount plus VAT.
- Bank Valuation Fee – Applicable when buying with a mortgage, usually ranging from Dh2,500 to Dh3,500.
4. Agent Fee
This fee compensates the real estate agent for their services, including negotiations and guidance throughout the buying process. “This agency fee is 2% plus VAT of the purchase price payable by the buyer,” he noted.
5. Service Charges
Once your property purchase is complete, you need to consider ongoing service fees.
“Essentially, it is a recurring fee that homeowners must pay for the maintenance and upkeep of their residential building or area and all its common amenities,” explained Anthony Joseph, CEO of Prime Stay Holiday Rentals.
Service charges can include various management aspects such as:
- Cleaning
- Maintenance
- Security
- Landscaping
- Waste disposal
- Repairs
- General upkeep
- Management and administration
- Utilities – DEWA
“While service charges apply to all types of properties in Dubai, including residential and commercial, the fees depend on the property type and services offered in the contract,” he elaborated.
How Much Service Charge Do I Need to Pay?
There is a service charge index provided by DLD, which helps clients and potential buyers understand the approved charges for different projects in Dubai.
“This service charge calculator will provide both the minimum and maximum charges of different communities across Dubai. Remember, service charges are calculated on a square-foot basis, ranging from Dh3 to Dh30 or more,” Joseph said.
Expert Advice – Consult a Mortgage Advisor
“If buying with a mortgage, then I would recommend speaking to a mortgage advisor and obtaining pre-approval before entering into a sales contract. It is strongly advisable to know how much you can afford when buying a property before you start looking for one,” Poulson emphasized.
This can help you avoid the disappointment of finding your dream home only to discover it exceeds your budget.
“On the flip side, you might pleasantly discover that you have more funds available than you initially thought. A good mortgage advisor will map out the necessary timelines for the sales contract, ensuring that banks have ample time to process the mortgage application,” he added.
Speak to a Reputable Real Estate Agent
Poulson advised finding a community specialist who can offer suitable properties, provide insights into local market trends, and share recent transaction data relevant to your area of interest.
“This way, buyers are more educated on the actual transaction prices in the community and can make a more informed decision on how much to offer on a property, giving you peace of mind that you have made a ‘fair’ price offer,” he stated.
