Dubai Real Estate

Actual Cost of Owning a Dubai Villa: Hidden Charges Every Indian Buyer Should Know

by · The Hans India

Highlights

Discover the real price of purchasing a Dubai villa. A guide for Indian buyers on charges, upkeep, and hidden costs.

The luxurious villas, modern apartments, and iconic skyscrapers found in the real estate market of Dubai are famous all over the world. The rich people from India cannot resist having their own villa in a city like this. To find your ideal abode, you can look for villas for sale in Dubai​ on Bayut, a leading property platform in the UAE. However, buying a property in Dubai is not as simple as writing its cost down. Hidden charges and extra expenses can greatly affect the total investment sum. This guide gives an extensive analysis of such costs so that potential purchasers are able to decide properly.

Understanding the Total Cost of Buying a Property in Dubai

The total cost of buying a property in Dubai is usually 7% to 10% of the property’s price after factoring in other costs. These costs may be classified into different categories such as:

  • Government and Administrative Fees
  • Agent and Brokerage Fees
  • Bank and Mortgage-Related Costs
  • Property Maintenance and Additional Fees
  • Insurance Costs
  • Initial Purchase Costs

Let’s delve deeper into each category.

1. Government and Administrative Fees

In Dubai, you cannot avoid paying government fees when buying or selling property as they take up a big percentage of the total amount to be paid.

Dubai Land Department (DLD) Fees: Buyers need to pay 4% of the property’s purchase price as DLD fees.

Property Registration Fees: For properties valued above AED 500,000, the registration fee is AED 4,000 (INR 92,349) plus 5% VAT (AED 200 / INR 4,617).

Mortgage Registration Fees: If financing through a mortgage, buyers need to pay 0.25% of the loan amount plus VAT.

Legal and Documentation Costs: These include expenses like AED 520 (INR 12,005) for issuing the Title Deed.

2. Agent and Brokerage Fees

Property purchases are greatly assisted by real agents although they come with associated costs:

Real Estate Agent Commission: Typically, agents in UAE charge 2% of the purchase price plus 5% VAT.

Conveyancing Fee: This fee covers legal transfer services to ensure contracts align with UAE law. It ranges from AED 5,000 to AED 10,000 (INR 1,12,500 to INR 2,25,000).

3. Bank and Mortgage-Related Costs

If you choose to pay for your house in mortgages and not cash, then be ready to incur other costs that are bank-related.

Mortgage Arrangement Fees: Banks usually charge 1% of the loan amount plus 5% VAT.

Property Valuation Fee: A valuation fee between AED 2,500 and AED 3,500 (INR 57,718 to INR 80,805) plus VAT is required for mortgage approval.

No Objection Certificate (NOC) Fee: If purchasing a mortgaged property, an NOC fee ranging from AED 500 to AED 5,000 (INR 11,543 to INR 1,15,436) is necessary to confirm all dues are cleared.

4. Property Maintenance and Additional Fees

The ownership of a villa in Dubai has some additional costs that are hidden including the ongoing cost of maintaining it.

Annual Service Charges: The upkeep of common areas in residential communities is what these charges cater to. They vary depending on the community and property type.

DEWA Fees: For villas, it costs around AED 4,000 (INR 92,349) to have electricity and water connected by the Dubai Electricity and Water Authority (DEWA).

5. Insurance Costs

Home ownership is made expensive by insurance, although it offers financial protection to the owner.

Home and Contents Insurance: It guards one against possible harm or loss. The lowest premium is about AED 1,000 per annum (INR 23,087), however it changes depending on the value of the property.

Life Insurance for Mortgages: It is a requirement for people with mortgages to make sure they can still pay off their loans if something unexpected happens. Normally, the annual premium is about 0.4% - 0.8% of the decreasing loan balance.

6. Initial Purchase Costs

To secure a villa in the secondary market, you will need to pay approximately a 10% deposit. The function of this payment is to commit you to completing the transaction. While concluding on different formalities, make sure that you have secured your villa by paying this initial amount.

Example Calculation: Total Cost for a Villa Worth AED 2 Million

Here’s an example calculation showing how much an Indian buyer will actually spend on a villa worth AED 2 million:

  • DLD Fees: AED 80,000
  • Property Registration Fee: AED 4200
  • Mortgage Registration Fee: AED 5,290
  • Real Estate Agent Commission: AED 42,000
  • Conveyancing Fee: AED 7,500
  • Mortgage Arrangement Fee: AED 21,000
  • Property Valuation Fee: AED 3,150
  • DEWA Setup Fee: AED 4,000
  • Initial Deposit: AED 200k

Total Estimated Cost: AED 367k (INR 84.73 lakh), excluding recurring maintenance or insurance costs.

Conclusion

To have a villa in Dubai is very luxurious and can bring a lot of returns but on top of the cost indicated there are other charges. The cost ranges from government charges to recurring expenditures such as DEWA charges or insurance premiums which must be well understood for a transparent deal. If Indians want to buy property in Dubai, they should plan well about the future cost because the exchange rate may affect its long-term sustainability.

Frequently Asked Questions

Q1. Are there any restrictions on property ownership for Indian buyers in Dubai?

A: It is true that foreigners, Indians inclusive, are restricted to buying properties within specific freehold locations in Dubai. In these places, one has the privilege to fully own his property and therefore can be able to sell, lease, or transfer it at will.

Q2. How does currency exchange impact the total cost for Indian buyers?

A: The buying price of a villa in Dubai can be greatly affected by the prevailing exchange rates. Given that payments are made in AED, any changes witnessed under the INR-AED exchange rate could move the cost up or down. Purchasers have to keep an eye on the exchange rates.

Q3. What happens if I decide to sell my villa later?

A: If you sell your villa in Dubai, you will have to pay some fees. This may include the 2% agent's commission (subject to VAT), any accrued service/maintenance charges, or mortgage balance. On top of that, there is no capital gains tax which is why this can be a great choice for investors looking to sell their property profitably.