UAE Property Buyers to Face Higher Upfront Costs as Banks Stop Financing DLD, Brokerage Fees

UAE Property Buyers to Face Higher Upfront Costs as Banks Stop Financing DLD, Brokerage Fees

Starting February 1, 2025, property buyers in the UAE opting for mortgages will need to pay the Dubai Land Department (DLD) fee and brokerage commission upfront, following a significant change in bank financing policies.

No More Financing of Fees

Real estate industry experts revealed that, until now, UAE banks had been financing the 4% DLD fee and the 2% brokerage fee as part of the mortgage. However, this will no longer be the case starting next month.

Rohit Bachani, co-founder of Merlin Real Estate, confirmed the change, stating, “From February 1, 2025, UAE banks will no longer finance the 4% Dubai Land Department fees or the 2% brokerage commission for property buyers seeking mortgages.”

Bachani noted that this change brings the UAE market in line with international standards, pointing out that banks in mature markets, such as the UK and the USA, typically do not finance these types of fees. He emphasized that while the transition may create some initial challenges, the market is likely to adjust, with no long-term effects on the mortgage borrowing process. Given the current market boom, Bachani expects the growth trend to continue.

Impact on Off-Plan Properties

Farooq Syed, CEO of Springfield Properties, discussed the potential impact of this move on the property market, especially concerning off-plan properties. Syed suggested that the decision could make off-plan properties more attractive to buyers, as it will require more upfront funds to purchase secondary market properties, particularly for those using a mortgage.

“With the additional costs, buyers will need an extra 6% in upfront payments,” Syed explained. “This could make off-plan developments with long payment plans more appealing as they require lower upfront capital.”

Syed further anticipated that this shift could exert some downward pressure on secondary market property prices. He sees this as an important step by the government to prevent the market from overheating.

Additional Costs for Buyers

The new policy means that property buyers will have to cover the DLD and brokerage fees on their own. For instance, in the case of a Dh1 million property, this could add an additional Dh60,000 to the initial payment. While this raises the cost of buying property in the short term, it is expected that the market will adapt to the change over time.