Understanding the New UAE Property Financing Regulations

Starting February 1, 2025, UAE banks will no longer finance the 4% Dubai Land Department (DLD) fees and the 2% brokerage commission for property buyers seeking mortgages. This change means that property buyers will need to pay these fees upfront, increasing the initial costs associated with real estate purchases.

Key Takeaways from the New Property Buying Rules

  • Banks will not cover DLD fees and brokerage commissions
  • Buyers must pay these fees upfront, increasing initial costs
  • Impact on secondary market properties, making off-plan properties more attractive
  • Designed to stabilize the market and prevent overheating

Why Are UAE Banks Making This Change?

According to Rohit Bachani, co-founder of Merlin Real Estate, this decision brings the UAE mortgage market in line with international standards. In mature real estate markets like the UK and the USA, banks typically do not finance government-related fees, focusing solely on fixed asset loans.

“This change is a step towards aligning with international standards. Although there might be an initial hiccup, the market will eventually accept the new standard, and there will be no long-term effect on the mortgage borrowing process.”Rohit Bachani, Merlin Real Estate

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

Impact on Off-Plan vs. Secondary Market Properties

With this change, off-plan properties are expected to become more attractive, as developers often offer flexible payment plans that require lower upfront costs. Buyers will find it harder to afford secondary market properties, as they now need to pay 6% extra upfront, which is a significant amount.

“A property buyer will need an additional 6% upfront, which is a lot. More people will opt for off-plan and primary properties as they will have lower down payments and fewer barriers to entry.”Farooq Syed, CEO of Springfield Properties

Comparative Analysis: Off-Plan vs. Secondary Market After the Change

Property TypeUpfront Cost (Before Change)Upfront Cost (After Change)Flexibility in Payment
Off-Plan PropertiesLower (Developer Payment Plans)Remains the SameHigh (Flexible Installments)
Secondary MarketBank Financed FeesExtra 6% UpfrontLower Flexibility
Mortgage BuyersCovered FeesNow Needs to Pay DLD & Brokerage FeesLimited Flexibility

Financial Implications for Property Buyers

The table below demonstrates how the changes will impact buyers financially based on property value:

Property Value (AED)Additional Upfront Payment (DLD + Brokerage Fees)
1,000,000AED 60,000
1,500,000AED 90,000
2,000,000AED 120,000
5,000,000AED 300,000

Market Stability and Government Strategy

The UAE government has implemented this move to maintain a stable real estate market and prevent overheating. Springfield Properties’ CEO, Farooq Syed, emphasized that this adjustment may put slight downward pressure on prices, ultimately helping to stabilize the market.

“This is a move from the government to prevent overheating. It is an important step to keep the prices under control.”Farooq Syed, CEO of Springfield Properties

Impact on Different Buyer Segments

Buyer TypeBefore February 2025After February 2025
First-time HomebuyersEasier mortgage financingHigher upfront costs
InvestorsLower initial investmentsPreference for off-plan properties
DevelopersSecondary market demandMore demand for primary properties

Frequently Asked Questions (FAQ)

1. What are the new financing rules for property buyers in the UAE?

As of February 1, 2025, UAE banks will no longer finance the 4% DLD fees and the 2% brokerage fees. Buyers must pay these fees upfront.

2. Why are banks making this change?

The move aligns UAE property financing with international standards, where government-related fees are not financed by banks.

3. Will this impact mortgage approvals?

Yes. Buyers now need more cash upfront, making it harder for some to qualify for mortgages.

4. Which properties are most affected?

Secondary market properties will be harder to buy due to increased upfront costs. Off-plan properties will be more attractive due to developer-backed payment plans.

5. How can Affinitas DMCC help me buy property in the UAE?

Affinitas DMCC offers expert financial planning, mortgage assistance, tax advisory, and banking solutions to help property buyers navigate the changing market.

Final Thoughts

This change is a significant shift in the UAE property market, impacting buyers looking for mortgages. While off-plan properties gain more appeal, secondary market buyers must prepare for higher upfront costs.

Plan your finances smartly!Contact Affinitas DMCC for expert guidance on property investments, accounting services, tax advisory, and financial planning in the UAE.