Unexpected Expenses When Purchasing Property in Dubai

By | April 12, 2024

Many people dream of owning a home in the United Arab Emirates, which is becoming a more popular choice for real estate investments because of its convenient location and first-rate amenities.

Nevertheless, investors should look into the unforeseen costs associated with buying real estate in Dubai, including fees for the Dubai Department of Land (DLD), mortgage application fees, and appointment fees. Real estate developers in Dubai charge between 500 and 5000 AED for no-objection certifications. With more people and businesses looking to buy real estate in Dubai, it’s important to assess these additional costs so that you can better manage your budget.

The urge to purchase real estate in Dubai gives rise to worries about additional costs or hidden costs that potential buyers might not be aware of. Before making a final financial decision, it is imperative to thoroughly educate oneself to minimize misunderstandings and issues.

Fee imposed by the government.

Any goods purchased in Dubai require payment to the Dubai Land Department (DLD). The buyer must disclose every real estate purchase to the DLD. Transactions not submitted to the DLD within 60 days following acquisition are deemed invalid.

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    DLD costs amount to 4% of the property’s total value. Additionally, the DLD requires the purchaser of real estate, bought with a financial institution loan, to repay 0.25% of the loan balance. Homes bought with cash are exempt from this fee. If you use a mortgage to purchase a home, an additional AED 290 fee is applicable.

    Four percent of the final transaction price is the Department of Land Charges.

    The cost of registering a property

    • AED 2,000 + 5% VAT is the fee for properties valued at less than AED 50,000.
    • The cost is AED 4,000 + 5% VAT for properties over AED 50,000.
    • The mortgage application fee in Dubai is equal to 0.25% of the entire loan amount.

    Fees for Agency Services

    One of the other hidden expenses of purchasing and owning real estate in Dubai is agent commissions. Whether you’re looking to buy or rent a home in the United Arab Emirates, having an agency’s help can simplify the process. There are a lot of advantages to having an agent represent you, but the costs are not negligible.

    Generally speaking, a real estate agent receives 2% of the sale price; however, this might vary depending on the area and type of property. Additionally, a conveyance fee of between AED 6,000 and AED 10,000 applies. Only if conveyancer services are used throughout the transaction is the fee assessed.

    Mortgage Charges

    Look at the extra costs associated with getting a mortgage in Dubai, such as a 1% mortgage arrangement fee and 5% value-added tax. Additionally, to obtain a Non-Objection Certificate (NOC) required for property registration with the DLD, the buyer must pay off the existing mortgage. The evaluation fee for the property ranges from AED 2500 to AED 3500.

    No-Object Certificate

    The buyer must obtain a No Objection Certificate (NOC) if the property owner has a mortgage registered. You may obtain this certificate for an amount ranging between AED 500 and AED 500. It is important to keep this in mind as it may result in penalties down the road.

    Insurance Charges

    Among the additional expenses associated with purchasing and managing real estate in Dubai are insurance premiums. Homeowners insurance offers protection from natural disasters, accidents, theft, and damage, even though it’s not necessary in Dubai. Depending on the service you choose, the insurance costs change.

    Conversely, obtaining life insurance is necessary to apply for a mortgage. Normally, individuals owe the amount every month, but there are options for annual installments. Usually, banks offer their insurance policies to borrowers.

    The Hidden Costs of Buying Real Estate in Dubai

    Once the ownership transfer process is completed and the buyer of the property becomes the new owner, there are extra hidden fees associated with purchasing a home. The ensuing are the implicit expenses associated with owning a home in Dubai:

    Registration Fees for the Dubai Electricity and Water Authority

    The Dubai Electricity and Water Authority (DEWA) requires residents of Dubai to create an account to access utility services. The cost of installing meters might vary from AED 2,300 to AED 4,000, contingent upon the number of meters installed.

    Service fees

    The RERA maintenance index determines higher annual service charges for real estate owners in the United Arab Emirates. These levies support community growth and the real estate market’s financial stability. Accounting for these hidden costs may improve the simple purchasing process and budgetary planning. The constantly shifting residential real estate market offers exceptional profits for home sellers as well as renters. If you want to purchase real estate in Dubai, take into consideration houses, apartments, and villas for sale.

    Real Estate Insurance

    Purchasing a home in Dubai necessitates the purchase of homeowner’s insurance. It safeguards you against damage or loss to your possessions brought on by unforeseen events such as theft or natural disasters. The cost of building insurance premiums varies according to the value of the property, although they typically range from 0.5% to 1% annually.

    Fees for maintenance and services

    After transferring the property, the property owner incurs additional yearly maintenance payments known as service charges. These charges cover the expenses for maintaining the building’s common areas, including the swimming pool and elevator, in top condition. The task of collecting these monetary payments falls to the Dubai Land Department. RERA determines the per-square-foot maintenance cost using the service and maintenance index.

    When determining the cost of house ownership in Dubai, homeowners need to consider maintenance fees in addition to upfront costs. To maintain and improve their properties or communities, homeowners must pay these recurring fees.

    Security Deposit Refund

    To provide protection, the prospective buyer must provide a deposit, which the RERA Accredited agent collects. Ensuring the complete safeguarding and eventual return of your money, the agent collects 10% of the total cost of the sale.

    The Bottom Line

    Planning and preparation are necessary to ensure that all expenses associated with purchasing a home in Dubai are met, as there are unstated costs.

    Once you uncover the hidden expenses of buying a property in Dubai, you gain clarity for your financial decisions. This awareness empowers you to select the optimal real estate option. It allows you to make informed choices and navigate the property market effectively. Reputable company Penieltech offers a wide selection of Property management software for real estate owners that will generate revenue. Contact us for more information on Property Management Software and book a free consultation.