If you’re considering purchasing a property in Dubai through a mortgage, recent regulatory changes introduced by the Central Bank will have a notable effect on how some of your upfront costs are managed. Here’s what you need to know.
What Are Upfront Property Costs?
Upfront property costs are the initial costs incurred when buying a property. These must be paid in full at the time of purchase, along with the mortgage down payment. In Dubai, upfront property costs include:
- Dubai Land Department (DLD) Transfer Fee: 4% of the property value + AED 580 administrative charges
- Real Estate Broker Fee: 2% of the property value + 5% VAT
- DLD Mortgage Registration Fee: 0.25% of the loan amount + administrative charges
- DLD Trustee Fee: AED 4,000 plus 5% VAT for properties valued over AED 500,000 and AED 2,000 plus 5% VAT for properties valued under AED 500,000
- Bank Property Valuation Fee: AED 2,500 to AED 3,000 + 5% VAT
- Bank Processing Fee: 0.25% to 1% of the loan amount + 5% VAT
These fees can add up to a substantial amount, so understanding them is critical for budgeting whether you are buying a property or saving up to buy one.
What Has Changed?
Effective February 1, 2025, the Central Bank of the UAE has mandated that banks can no longer finance certain upfront costs as part of property mortgages. These include:
- DLD Transfer Fees (4% of the property value)
- Real Estate Broker Fees (2% of the property value)
Previously, up to 80% of these costs could be included in the mortgage, easing the financial burden on buyers. Now, buyers must pay these fees directly, significantly increasing the upfront cash required.
How Will This Affect Prospective Buyers?
This regulation promotes responsible lending and reduces the risk of over-leveraging, but it comes with implications for buyers:
- Increased Upfront Costs: Buyers now need liquid funds to cover not only the down payment (20–30% of the property value) but also the additional upfront fees, amounting to 6–7% of the property’s price.
- Savings and Budgeting: With mortgages no longer an option for covering these costs, buyers must focus on saving and financial planning. This includes reevaluating their budgets to accommodate the full range of upfront expenses.
- Impact on Buyer Behavior: Many buyers may turn to off-plan properties offering flexible payment plans to reduce the financial burden. Developers are likely to attract these buyers by offering incentives, such as waived DLD fees or post-handover payment options.
Conclusion
Navigating the Dubai property market can be difficult for a person buying their first property. The upfront property costs in Dubai can be challenging, especially with the recent update from the Central Bank. Buyers should consider these upfront costs as part of their overall investment, ensuring they have enough liquid money to cover these costs at the time of buying their intended property.
By staying informed and seeking expert advice, new buyers can approach the Dubai property market with greater confidence and get the most out of their purchase.
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