Buoyant property market puts billions in Dubai’s coffers

Alamy/Robin Weaver via Reuters

• 4% transfer fee worth $3.5bn
• Fee income up five-fold since 2019
• Fees ‘hinder non-affluent’

Dubai authorities have recorded a five-fold surge in the sums they earn from fees related to real estate transactions over the past five years to almost $4 billion, as the emirate’s property market grows stronger and prices rise sharply, AGBI has calculated.

The transfer fee, payable to the Dubai Land Department (DLD) upon a sale, is perhaps the most substantial of the charges, and amounts to 4 percent of a property’s price. 

An additional AED250 ($68) fee goes toward the issuance of the new title deed, among other administrative levies.  

In 2023, the most active year so far for the emirate’s residential real estate sector, an all-time-high of 118,200 units were traded, nearly 30 percent more than the previous year, analyses by Savills, CBRE and other industry consultancies show.   

The real estate brokerage Betterhomes separately found that the overall value of those transactions reached AED322 billion (nearly $88 billion) after a 52 percent year-on-year increase in prices.

An approximate calculation suggests these deals netted the DLD $3.52 billion in transfer fees, and another $30 million or so to release the relevant titles. 

By comparison, in 2019, the last twelve months before the Covid-19 pandemic, the total value of residential transactions in Dubai stood at AED60 billion, Betterhomes says. That translated approximately into $652 million in transfer fees, around a fifth of what DLD earned from the same levy four years later.

According to Property Finder, just under 42,000 sales transactions were recorded in Dubai in 2019, which yielded an additional AED10.5 million in title issuance fees.

The DLD and other government agencies in the emirate also impose other charges on property transactions, both sales and rentals, that go well beyond the ticket price. 

They cover the registration of tenancy contracts known as Ejaris, municipality taxes and fees linked to the issuance of mortgages, valuations and other ancillary processes.

“The DLD has established a comprehensive fee structure for both sale and rental transactions, governed by various UAE real estate laws and regulations,” says Mohamed Rabih Nizam, a partner at Dubai law firm Hussain Lootah & Associates. “Notably, these fees have remained fixed since the enactment of Law No. 2 of 2013.”  

The growth in sales-related fees becomes even steeper the further back in time you go. A local news report from 2006 suggested the DLD made AED640 million in transfer fees on AED32.1 billion in deals carried out in 2005. 

That was at a time when the levy was only 2 percent of the sale value, but it is still a stark reminder of just how much the Dubai real estate market has grown over the past two decades. 

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Tyne Hugo, a senior associate at BSA Law in Dubai, says the fees remain “comparatively lower” than similar ones in other jurisdictions even after the 2013 adjustments, and their stability over time “has certainly helped with the growth of the real estate market” in Dubai.

“For regular buyers, these fees will not be a surprise, as they haven’t materially changed in the past decade. However, first-time buyers should prepare themselves for the additional fees when purchasing a property,” Hugo says. 

Buyers and renters also pay fees to real estate agents, on top of the levies that go to the government. 

On the rental side, each new Ejari registration costs AED220, while renters also pay 5 percent of the value of their annual rent in taxes to the Dubai municipality.

Bayu says just shy of 820,000 rental contracts were registered in 2023, generating around AED180 million in contract registration fees. This was up from almost 470,000 Ejari contracts registered in 2019, translating into AED 103.2 million in fees.

High and increasing

While these additional costs of buying or renting a home in Dubai are high, and increasing in tandem with rising real estate prices, they are not out of line given the absence of income taxes in the emirate, suggests Matthew Myers, an assistant professor of real estate at Heriot-Watt University Dubai.

But property fees can keep non-affluent tenants from becoming homeowners, with consequences for the whole emirate of Dubai, Myers says.

“Owning a home can give people a stronger sense of belonging to the community,” he says. “If you think right now with the tensions in the region, people can easily say, ‘Well I’m leaving,’ and that creates a whole vacuum. When you have a home here, that’s harder to do.”