Property Buyers Face Higher Initial Costs
Real Estate Buyers Need Bigger Down Payments as Banks Stop Covering DLD and Agent Fees
From February 1, UAE banks will no longer cover the 4% Dubai Land Department (DLD) fee and the 2% real estate agent commission, meaning property buyers will need to pay these costs from their own funds. This change will have a significant impact on those looking to buy property in Dubai with a mortgage, as they will need to come up with a larger sum upfront at the time of purchase.
Background and Purpose of the Change
Previously, banks included these costs in the property's value when financing, but the new regulation aims to better align the UAE's real estate market with international norms. According to a co-founder of Merlin Real Estate, in similar markets like the UK and the USA, banks typically only finance the property's value, excluding related fees.
"This step is an important milestone towards transparency and market stability. While it may cause some initial challenges, the market will adapt in the long run, and taking out mortgage loans will remain attractive given the increasing demand," stated an industry expert.
Impact on Off-Plan Properties
The CEO of Springfield Properties believes that the new regulation will make off-plan (properties in the planning phase) properties more attractive. As secondary market buyers will now need to come up with significantly more capital upfront, developers' long-term payment plans will offer a more competitive option.
"A property buyer will now need at least 6% more capital at the time of purchase, which is a significant difference. The advantage of off-plan properties is that they require a lower initial payment, making market entry easier," they highlighted.
Experts suggest that the new regulation also aims at market stabilization, preventing excessive property price growth. The measure may exert slight downward pressure on prices, contributing to sustainable market development.
What Does This Mean for Buyers?
Under the new regulation, for a property worth 1 million dirhams, buyers will need to provide an additional 60,000 dirhams upfront, covering the DLD and agent fees. This could significantly impact purchase decisions, especially for first-time homebuyers who often rely on mortgages.
The Future of the Market
Despite initial challenges, the market will adapt to the new environment. Investors remain interested in Dubai's real estate market, and the popularity of off-plan properties is expected to continue growing as they offer more flexible payment options.
Overall, the new regulation indicates that Dubai's real estate market is increasingly aligning with international standards while aiming for long-term stability and sustainability. Property buyers should prepare for the new requirements and plan the necessary financial resources in advance.
