From February 1, property buyers in Dubai will have to pay more upfront when taking out a mortgage as banks will no longer cover the Dubai Land Department (DLD) fee and brokerage commission.
This means buyers will need to pay these fees out of pocket, making homeownership a bit more expensive for those financing.
Previously, banks included the 4% DLD fee and 2% brokerage commission in the total mortgage, so buyers could finance these costs along with their home loan.
This helped reduce the upfront costs for buyers, especially first-time buyers, but with the new regulation mortgage applicants will need to factor in these fees separately before finalizing their property purchase.
For buyers who plan to take out a mortgage, this means they will need to save more before buying a property. Here’s how it affects different price points:
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For a property worth AED 1 million: Buyers must pay AED 40,000 for the DLD fee and AED 20,000 for brokerage commission, totaling AED 60,000 upfront.
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For a property worth AED 2 million: The upfront cost for these fees will be AED 120,000.
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For a property worth AED 3 million: Buyers will need to shell out AED 180,000 before even securing their mortgage.
For many, this means delaying their purchase until they have the savings. First time buyers in particular will find it hard to get into the market with the additional upfront costs.
Real estate experts say this will impact market dynamics, especially for buyers who were financing a big chunk of their purchase.
While it won’t deter serious buyers, it does add another financial hurdle for them to plan for higher upfront costs.
Some industry insiders believe this will slow down certain segments of the market, especially mid-income buyers who don’t have large amounts of cash.
A senior real estate executive added, This will certainly impact buyers who rely on mortgages, as they now need to bring in more cash.
However, it also makes the market more stable by ensuring buyers are financially prepared before making a purchase.
On the other hand, cash buyers and investors who don’t need mortgages will benefit as they won’t be affected by this change.
In a market where affordability and accessibility is key in buyer decision making, this will lead to a more cautious approach from mortgage dependent buyers.
Some analysts say this may also result in a short term cooling of demand as buyers adjust to the new financial requirements.
Despite that, real estate experts say the Dubai market is still strongly driven by steady demand and investor interest.
While this policy may need buyers to adjust their plans, long term appeal of investing in Dubai’s property market will not be affected.
Many expect buyers to adapt over time and include the additional costs in their budgeting and decision making.
Mortgage advisors are recommending that buyers reassess their budgets and plan accordingly. This may be a short term challenge, but Dubai property market still has opportunities for both residents and investors looking for long term value.
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