The modern gateway between the east and west of the world, Dubai is the reigning hub of international business and trade. The property market of this advanced municipality has been attracting investors around the world for years. Considering the long-term demand and profitability of the real estate industry, people in and outside Dubai are showing interest in buying a property in UAE. While property prices range from low to high depending on the size and type of structure, you need to understand the additional fees for buying property in Dubai.
Property service charge is one of the most important fees to know about before buying a property in Dubai. Many buyers aren't aware of this additional cost associated with the purchase over and above the total cost of buying a flat or any real estate.
Here is our detailed blog about property service charges associated with a property purchase in the city.
What is the property service charge?
Once the property is transferred, the buyer technically owns the property. However, there are certain charges associated with it like annual maintenance expenses, also known as service charges. These charges are paid towards the maintenance of the property and amenities. These charges are paid to the Dubai Land Department. The maintenance charge is based on the RERA service and maintenance index, as per the square foot.
Who pays the property service charge in Dubai?
Service charges apply to each property owner. The service charge is calculated on a per square foot basis, with the amount varying between developments depending on factors such as which floor the apartment is located on, whether it has a terrace or balcony, etc.
What are the Dubai Land Department service charges?
The real estate market in Dubai has commissioned certain regulations to protect buyers and sellers. Hence, one needs to pay upfront fees which is different from the cost of the property itself. The upfront fees may depend on the type of property and therefore be different for different areas and property types.
Buying property in Dubai fees includes Dubai Land Department (DLD) fees. It can be considered as a one-time tax paid to the government. DLD fee is 4% of the total price of the property. DLD fees in Dubai are legally divided between the buyer and seller which is 50% each. However, in most cases, it is entirely paid by the property buyer.
Along with the mandatory DLD fees, buyers are also required to pay the property registration fees, which depend on the value of the property. The buyers purchasing property with the help of bank loans also need to pay the mortgage registration fees with DLD.
Here is the division of transfer and registration fees:
- DLD Fees = 4% of the property price + Admin fees (AED 580 for apartments and offices, AED 430 for land, AED 40 for off-plan)
- Registration Fees for properties valued below AED 500,000 = AED 2000 + 5% VAT
- Registration Fees for properties valued above AED 500,000 = AED 4000 + 5% VAT
- Mortgage registration fees Dubai Land Department = Up to 0.25% of loan amount + AED 290
It is crucial to know that DLD fees need to be paid within 60 days otherwise the purchase stands canceled. Also, people not opting for bank loans need do not pay any mortgage registration fees.
Is there a property service charge in Dubai?
Whether it is a villa or apartment, retail or commercial property, service charges in Dubai are applicable to all types of properties in the city. These fees are charged on a square foot basis and can range anywhere between AED 3 to AED 30 or more.
Property buyers have to pay additional fees for buying property in Dubai. However, there are many fees aside from the property service charges, such as property transfer and registration fees, agency fees, security deposit, insurance fees, and Dubai electricity and water authority fees.
How is property service charge calculated in Dubai?
Service charges in Dubai are calculated on a per square foot basis, and for villas the charge is based on the plot area. The total cost of service charges that are applied to a property varies depending on various factors such as:
- Community location – The neighborhood that the property is located in.
- Project type – The building/sub-community in the neighborhood.
- Usage of the property – The purpose for which the property is purchased. This includes retail, commercial, residential, offices, villa, serviced apartments, and so on.
Also, the service charges in more upscale areas can be higher compared to those for a similar property in a more budget-friendly location. The Meydan villas for sale, for instance, have higher service charges than the JVC villas for sale.
Other factors that affect the cost of service fees in Dubai include the developer and the size of the property a homeowner has. As per the above parameters, homeowners will be charged a series of standard service fees for the property such as setting up DEWA, maintenance, etc. Here is the list of the most common service changes that are usually charged to the owner:
- Utilities – DEWA
- Master Community
Apart from these, developers also charge something known as a Sinking Fund. The sinking fund for properties in Dubai acts as reserve funds which are set aside for any major repairs or maintenance that may be required in the future. This sinking fund is also payable by the homeowner and will cover items such as repair, renovation, or replacement of the roof, external cladding, fire alarms, safety systems, A/C systems in the common areas, windows, balconies, parking areas, elevators, and so on. Other service charges that add-on to the total cost includes utilities for chiller-free and district cooling units.
What’s the new property service charge in Dubai that got implemented in Jan 2022?
Property owners in Dubai will be paying less on their service charges in 2022 as key locations in Dubai record 10-15 percent cuts on facilities management costs. These reductions will be, in most cases, be passed on to the property owners.
The 2022 cuts mean that buildings at Dubai Marina are averaging Dh14-Dh28 a square foot, while those at JLT are now at Dh13-Dh17 per square foot on average, and in Jumeirah Village Circle at Dh13-Dh22. At villa communities, the service charges are at Dh2-Dh6 a square foot.
All these charges exclude those for chiller services. So, what has happened is that developers have trimmed the facilities management side of the service fees. These are the fees generated directly for the upkeep of the common area of communities and buildings.
The average 10-15 percent drop in 2022 service charges will be a hook for private developers to win new end-user buyers. This is particularly handy for mid-market communities that are likely to see renewed buying attention.
Which communities have the lowest and highest service charges in Dubai?
Below is a summary detailing the average annual service charges in some of Dubai’s popular communities:
International City & Discovery Gardens:
Business Bay, Dubai Marina & Jumeirah Lakes Towers:
Average service charges in Business Bay, Dubai Marina and Jumeirah Lakes Towers – all the three communities, were put at Dh15 psf, respectively, while in The Greens community and Palm Jumeirah average charges were Dh13 psf.
Sports City & JVC
There are minimal differences in service charges for Arabian Ranches 1 and 2 depending on which neighbourhood you live in. However, in Arabian Ranches 1, you can expect to pay around AED 0.89 psf, whereas in Arabian Ranches 2, you can expect to pay around AED 2.44 psf.
Downtown Dubai is noted for having the highest service charges because it is one of Dubai's most prestigious areas. The minimum fee is AED 11.01 psf on average across the area, however this isn't a particularly useful metric because the actual charge can be more than three times that depending on which tower you're in.
Some of the most well-known projects in Downtown Dubai, as well as their associated fees, are listed below. The Burj Khalifa, unsurprisingly, stands at the top of the list.
- Burj Vista - AED 17.44 psf
- Vida Residences Downtown - AED 23.79 psf
- The Address Fountain Views - AED 25.42 psf
- The Address Downtown - AED 41.35 psf
- The Address BLVD - AED 28.03 psf
- Burj Khalifa - AED 67.88 psf
Should I consider solicitor costs as part of additional fees for buying an apartment in Dubai?
A solicitor or conveyancing lawyer will help smoothen the property buying process for you. They understand the market really well and advise with necessary documentation and procedures formalized by Dubai Government. Though not mandatory, it is advisable to hire a conveyancing lawyer to ensure the seamless purchase of your property in Dubai.
Can foreigners buy property in Dubai?
Yes, foreigners can buy property in Dubai in any of the freehold areas. Dubai has numerous freehold locations where foreigners are allowed to own property.
Is there any property tax and stamp duty in Dubai?
There is no property tax levied in Dubai, nor do you need to pay any inheritance or income tax. However, property buyers have to pay a stamp duty which ranges within 1% to 7% of the property purchase price in the UAE.
We hope you found this blog informative and handy. If you'd like to stay updated with all other legalities in the real estate sector in Dubai and other emirates, keep an eye on Driven Properties blog.