In a shift for the UAE real estate market, property buyers will now face higher upfront costs when purchasing properties. This change comes as banks in the UAE have stopped financing the 4% Dubai Land Department (DLD) transfer fees and 2% agency fees, which were previously often included in mortgage financing.
When and Who Passed the Law
The Central Bank of the UAE issued the directive, which took effect February 1, 2025. This move aligns the UAE’s property market more closely with international standards, where banks in the US and Europe typically don’t fund these fees and only mortgage fixed assets.
Why the Law Was Passed
The decision to stop financing these fees appears to be part of a broader strategy to:
- Ensure more responsible lending practices
- Reduce overall debt levels for property buyers
- Align the UAE market with global real estate financing norms
- Cool the market and manage debt financing for both lendors and customers.
Long and Short-Term Effects
- Higher Upfront Costs: Buyers now need to cough up 6% of the property value in cash.
- Affordability Challenges: This change may impact the affordability of properties, especially for first-time buyers and those with limited upfront cash reserves.
- Slower Decision-Making: Potential buyers may take longer to make purchasing decisions as they need to save more for upfront costs.
- Price Stability: slight downward pressure on prices will take place as buyers brace for higher up-front costs when buying ready property.
- Continued growth in off-plan sales: As ready properties get more expensive due to closing costs and market forces, off-plan investments make more sense with their flexible and post-hand-over payment plans becoming more attractive to home buyers.
Breaking Down the Numbers
For a clearer perspective, let’s look at what this means for buyers:
For example, on a property worth AED 1 million, buyers will now need an additional AED 60,000 for DLD and agency fees on top of the 20% down payment. All of these closing costs are on every listing on https://viewit.ae/.
Recent Market Performance
Despite this new regulation, the Dubai real estate market has shown robust performance:
- In January 2025, total property sales reached AED 44.4 billion, a 24% increase from January 2024.
- The total number of transactions in January 2025 was 14,236, up 23.2% from the previous year.
- In 2024, Dubai recorded 180,987 worth AED 522 Billion in real estate transactions, a 36.5% increase from 2023.1
Conclusion: What time means for the UAE Real Estate Market
While this move may create short-term challenges for some buyers, it also represents a move towards a more mature and stable market and the government pumping the breaks on a bull market.
Considering the strong performance of Dubai’s real estate sector in 2024 and early 2025, with record-breaking transaction numbers and values. This new measure might serve as a balanced approach to maintain market stability while continuing growth. The option to invest in off-plan properties remains lucrative as it accounted for over 63% of total real estate purchases in Dubai in 2024.2
However, it will be crucial to monitor how this change affects transaction volumes and property values in the coming months, especially in light of the impressive growth seen in 2024 and early 2025. The real test will be whether the market can maintain its momentum while adapting to these new financial requirements for buyers.