Buyers guide: Property service charges in Dubai 2019

Buyers guide: Property service charges in Dubai 2019

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:

  •  Services
  •  Maintenance
  •  Utilities – DEWA
  •  Management
  •  Insurance
  •  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.