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What are closing costs and who pays them?

closing costs who pays them

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Before buying a property in Dubai, it is important to take into consideration various fees and charges which are not included in its selling price. The fees and charges, commonly called closing costs, are levied on both the buyer and the seller and usually take the home buyers by surprise. If a buyer is purchasing a home on a mortgage, then he needs to account for these costs beforehand. In this article, we will talk about closing costs and who pays them.

It is important to note that the closing costs are different for resale/pre-owned properties, off-plan and newly completed units. Here is a look at the closing costs:

Off-plan Properties or Newly constructed direct units (never owned)

  • Oqood fees – These are charged by the Dubai Land Department (DLD) at the same time when the first payment is due, or just after. These charges are 4% of the original net price of the property + a knowledge fee of AED 20.

Also Read: What are Off Plan & On-Plan Properties? Which is a better option to invest?

Resale properties or Pre-owned properties

  • The agency or broker employed by the buyer will charge a fee of around 2% of the net selling price of the property.
  • The Dubai Land Department charges a transfer fee of 4% of the net selling price of the property + administrative fee of AED 540. Further, an additional amount of AED 4,000 needs to be paid on the day of the transfer to facilitate the transfer at one of the transfer offices. Usually, the buyer and the seller split this cost.
  • If the seller already has a running mortgage on the property, then it is required to obtain a liability settlement statement from his mortgage provider. Most banks and financial institutions charge for this service and the charges can be different for different financers.
  • Before selling the property, the seller needs to provide a No Objection Certificate (NOC) from the developer. Developers charge anywhere between AED 1000 to AED 5,000 to provide this certificate.
  • Fees and charges associated with registering and deregistering a mortgage (as applicable). The DLD charges a mortgage registration fee of 0.25 percent of the loan amount including AED 290 as a standard charge.

Conveyancing fees

    • Cash transactions without the involvement of a mortgage – AED 6,000
    • Mortgage Purchaser and Cash Vendor – AED 8,000
    • Cash or Mortgage Purchaser with Mortgage Vendor – AED 10,000. In this case, the conveyancing company will take a Power of Attorney from the vendor. This means an additional notarizing fee of AED 1,500 at the Dubai Court and AED 3,500 at a court outside the UAE. Additionally, there is a fee to block the vendor from selling the property to someone else after his mortgage has been cleared of AED 2,010.
    • If the price of the property is more than AED 15,000,000, the conveyancing company charges are AED 20,000.
    • Charges for the initial registration of the properties without any title deed – AED 1,000 in addition to the above-mentioned fees.
    • If the property is being gifted among relatives, then the conveyancing company fees are AED 5,000

DEWA charges for properties that are newly transferred

The Dubai Electricity and Water Authority or DEWA levies the following fees/charges for newly transferred properties:

  • In case of an apartment or office –
    • A refundable deposit of AED 20,000 +
    • A reconnection charge of AED 100 (can vary) +
    • A knowledge or innovation fee of AED 30
  • In case of a Villa –
    • A refundable deposit of AED 4,000 +
    • A reconnection charge of AED 100 (can vary)

Once the property is sold, the deposit is refunded.

Emirates Central Cooling Systems Corporation (EMPOWER) charges

  • For apartments –
    • A refundable security deposit of AED 2,000 +
    • An approximate quarterly demand charge of AED 500
  • For offices –
    • A refundable security deposit of AED 4,000 +
    • An approximate quarterly demand charge of AED 500

This security deposit is also refunded, once the buyer sells the property. Also, for the primary owner, an additional connection fee of AED 2,000 + an admin fee of AED 1,000 is required to be paid along with the charges mentioned above.

ISTA charges (for City Walk)

There is a connection fee of AED 200. Additionally, you need to pay a refundable security deposit of:

  • Studio or a 1 Bedroom – AED 1,500
  • 2 Bedroom – AED 2,000
  • 3 Bedroom – AED 3,000
  • 4 Bedroom – AED 3,500

There can be other charges or fees associated with purchasing a property in Dubai depending on the area where you are purchasing it, the developer, and the seller. As you can see above, these charges can add up to a substantial amount. Therefore, it is prudent to find out as much as you can about the closing costs before creating a budget for your real estate purchase. Talk to your broker or a real estate consultant to get a comprehensive idea about the closing costs.

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