UAE Property Buyers Face Higher Upfront Costs Starting February 1, 2025
Property buyers seeking mortgages in the UAE will soon need to pay higher upfront fees. Starting February 1, 2025, UAE banks will no longer finance the four percent Dubai Land Department (DLD) fee and two percent brokerage commission. Previously, banks included these fees as part of the mortgage package. This change significantly impacts property buyers, particularly those opting for a mortgage.
Shift Towards International Standards
Rohit Bachani, co-founder of Merlin Real Estate, noted that this move aligns with international standards. In mature markets like the UK and USA, banks do not finance these types of fees. Bachani believes this change will eventually benefit the market. He added that the market would eventually accept this adjustment. Despite initial challenges, he predicts no long-term impact on mortgage borrowing processes.
Impact on Off-Plan Property
Farooq Syed, CEO of Springfield Properties, emphasized that this change will make off-plan properties more appealing. Off-plan properties often require lower upfront payments compared to secondary market properties. As buyers will now need more funds for secondary properties, they are likely to shift to off-plan options. Developers with long payment plans will offer more attractive alternatives.
Off-Plan Properties Gain Popularity
Syed believes this shift will lead to increased interest in off-plan properties. Buyers will need an additional six percent upfront to purchase secondary properties. Developers with more flexible payment plans will likely benefit from this trend. Syed predicts this shift will put downward pressure on secondary property prices. The overall market will remain stable as prices adjust.
Potential Impact on the Market
While buyers face higher initial payments, the market is expected to remain strong. According to Bachani, buyers will need to cover the DLD and brokerage fees upfront. For example, on a Dh1 million property, this means an additional Dh60,000 in upfront costs. This adjustment may cause some temporary strain on buyers, but the market will stabilize.
UAE Property Market Stabilization
Syed believes the government’s move is essential to prevent the market from overheating. Keeping prices under control will help maintain a stable and healthy market. This step aims to ensure the UAE property market continues to thrive without significant volatility.