Given the multiplicity of additional costs, the total expense for purchasing real estate easily amounts to 7-10% above the advertised base cost in Dubai, even before moving in.
Buying property in Dubai is often seen as a lucrative investment opportunity, attracting buyers from all over the world. However, potential buyers should not just take the advertised price into account.
Indeed, a multitude of additional fees, charges, insurance costs and recurring expenses must be taken into account, as they significantly increase the total cost of ownership over time.
Here is a detailed analysis of the various expense categories, aimed at assisting buyers in developing a budget for their next real estate investment.
Government and administrative fees
Government agencies, such as the Dubai Land Department, impose various administrative fees for all real estate transactions.
Land Registration Fee: A 4% tax is levied by the Dubai Land Department on the purchase price.
Registration fees: Fees from AED 2,000 to AED 4,000 depending on the value of the property for registration in the name of the new owner.
Mortgage registration fee: Banks charge 0.25% of the loan amount, plus an additional processing fee for registering the mortgage.
Legal documentation fees: All associated legal documents, such as title deeds, can cost up to AED 500.
Agency and brokerage costs
The intervention of a real estate agent further increases expenses.
Standard real estate commission: Agents charge 2% of the sale price plus 5% VAT for their sales facilitation services.
Property Conveyancing and Title Deeding Services: Legal services related to contract drafting and property transfers cost approximately AED 5,000 to AED 10,000.
Mortgage-related expenses
Bank arrangement fee: Banks generally charge an arrangement fee of 1% of the value of the mortgage.
Mandatory property valuation: Mortgage approval requires an independent valuation priced between AED 2,500 and 3,500.
Mortgage life insurance: Mandatory insurance covering 0.4-0.8% of the loan per year is required.
Community fees and utilities
After acquisition, owners also become responsible for the maintenance and costs of the community.
Annual Service Fee: Charged quarterly by the community management for upkeep and maintenance as per RERA guidelines. The amount is determined by the RERA Service and Maintenance Fee Index and may vary depending on the area and community.
DEWA Connection Deposits: A deposit of AED 2,000 to AED 4,000 is required for establishing utility connections.
Initial expenses
Down Payments: As a general rule, 10% of the property value is usually requested as a down payment in the secondary market.
Additional off-plan charges: Housing estates levy additional charges such as title deed fees or Oqood certificate fees.
Potential hidden costs
Property insurance premiums: Coverage for buildings and their contents is recommended at around AED 1,000 per year.
No Objection Certificate Fee: Up to AED 5,000 may be charged for mortgage clearance upon resale.
Given the multiplicity of additional costs, the total expense for purchasing real estate easily amounts to 7-10% above the advertised base cost in Dubai, even before moving in.
2024-02-20 17:08:18
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