Effective February 1, 2025, the Central Bank has implemented a significant policy change affecting real estate transactions. The 6% combined fees—consisting of 4% Dubai Land Department (DLD) fees and 2% agency fees—can no longer be included in mortgage lending. This means that buyers must now pay these fees upfront, separate from their mortgage loan.

What Does This Suggest for Buyers?

Historically, some buyers were able to include these fees in their mortgage approval, which alleviated the immediate financial burden of purchasing a property. However, with this new directive, buyers will need to ensure they have sufficient liquidity to cover these costs in addition to their down payment and other associated expenses.

For example, on a property valued at AED 2 million, the 6% fees amount to AED 120,000. Buyers will now need to pay this amount out-of-pocket, alongside the standard 20% down payment required for most mortgage approvals.

Transition Period: Key Dates to Note

While the policy officially took effect on February 1, 2025, there is a transitional grace period for buyers with pre-approved mortgages:

• Mortgage Approvals Before February 1, 2025: If your mortgage was approved before this date, you may still include the 6% fees in your loan, provided the property transfer is completed by March 31, 2025.
• Property Transfers After March 31, 2025: Any transfers occurring after this date will no longer qualify for the inclusion of fees, even if the mortgage approval predates February 1.

Impact on the Real Estate Market

This regulatory shift is expected to have a noticeable impact on the property market. Buyers, particularly first-time homeowners, will need to carefully budget for the additional upfront costs, potentially slowing down transaction volumes in the short term. Developers and agents may need to adjust their strategies to accommodate this change, possibly offering incentives or flexible payment plans to ease the financial strain on buyers.

Mortgage lenders, on the other hand, are likely to experience an uptick in inquiries and approvals in the weeks leading up to major regulatory deadlines, as buyers rush to secure favorable terms before the cut-off dates.

Tips for Buyers Navigating the New Regulations

• Plan Your Budget: Ensure you account for the 6% fees in your financial planning. Speak with a financial advisor or mortgage consultant to understand the full scope of costs.
• Act Quickly: If you already have a pre-approved mortgage, aim to complete the property transfer before March 31, 2025, to take advantage of the transitional allowance.
• Negotiate with Sellers: In light of the new rules, ensure you are using the right real estate agent to try and negotiate on the property price to make the transaction more attractive.
• Explore Developer Incentives: Developers may introduce fee waivers or other promotions to support buyers in this new regulatory landscape.

Final Thoughts

While the Central Bank’s decision to exclude the 6% fees from mortgage lending aims to promote financial prudence, it adds a layer of complexity for buyers and stakeholders in the real estate market. Being prepared and staying informed will be crucial for navigating these changes effectively. Buyers are encouraged to consult with experts to ensure a seamless transaction process under the new regulations. Let fäm Properties help you make informed decisions in this evolving market. Contact us for a consultation.