Investing in Dubai’s real estate market is an attractive opportunity due to its tax-free environment, high rental yields, and luxury developments. However, beyond the listed property price, there are several hidden costs that buyers should be aware of. These additional expenses can significantly impact the total investment, so it’s crucial to understand them beforehand. Below, we break down the most common hidden costs associated with buying property in Dubai.

1. Dubai Land Department (DLD) Registration Fees

The Dubai Land Department (DLD) imposes a registration fee, which is usually 4% of the property’s purchase price. This must be paid by the buyer at the time of property registration and is essential for legal ownership.

2. Real Estate Agency Commission

Buyers typically need to pay 2% of the property price to the real estate agent handling the transaction. This fee is standard in Dubai’s property market and covers the agent’s services throughout the buying process.

3. Mortgage Fees (If Applicable)

For buyers financing their purchase through a mortgage, banks and financial institutions charge additional fees:

• Mortgage Registration Fee: 0.25% of the loan amount + AED 290
• Bank Processing Fee: 0.5% – 1% of the loan amount
• Property Valuation Fee: AED 2,500 – AED 3,500 (varies by bank)

4. Service Charges & Maintenance Fees

Service charges cover the upkeep of communal areas, security, landscaping, and other amenities in residential communities. These fees are charged annually and vary based on the property type and location.

• Apartments: AED 10 – AED 30 per square foot
• Villas: AED 3 – AED 6 per square foot

For example, an apartment in Downtown Dubai with a size of 1,000 sq. ft. could have service charges of AED 10,000 – AED 30,000 per year.

5. Property Insurance

While not mandatory, it’s advisable to get property insurance for protection against unforeseen damages. The cost varies depending on the property value and coverage but typically ranges from AED 1,000 – AED 3,000 per year for standard home insurance.

6. Moving Costs and Utility Deposits

Upon purchasing a property, buyers need to pay for moving expenses and set up utility accounts with service providers:

• DEWA (Dubai Electricity and Water Authority) Deposit:
  • Apartments: AED 2,000
  • Villas: AED 4,000
• Telecommunications Setup (Internet & TV): AED 500 – AED 1,000

7. Owner Association Fees (If Applicable)

Certain communities and freehold developments require owners to pay additional association fees to maintain exclusive amenities and services. These costs vary widely based on the developer and the community’s features.

8. VAT on Certain Services

While there is no capital gains tax on property in Dubai, some real estate services are subject to 5% VAT, including:

• Real estate agent commission
• Property management services
• Legal consultation fees

9. Exit Costs: Selling and Transfer Fees

If an investor decides to sell the property, there are additional costs involved:

• DLD Transfer Fee: 4% of the sale price
• Agency Commission: 2% of the sale price
• Mortgage Prepayment Fees (if applicable): 1% – 3% of the remaining loan amount

Conclusion

While Dubai offers an attractive real estate market with no income tax or capital gains tax, hidden costs can add up significantly. Buyers should factor in DLD registration fees, service charges, agency commissions, and mortgage-related expenses to get a clear picture of their total investment. Understanding these additional costs will ensure a smooth and financially sound property purchase in Dubai.