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Thu 26 Sep 2013 10:52 AM

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Dubai Land Dept to double transfer fees

EXCLUSIVE: Fees to rise to 4% in a bid to reduce flippers

Dubai Land Dept to double transfer fees

Dubai Land Department is set to double the  transfer fees on property sales, Arabian Business has learned.

The fees will rise from 2 percent to 4 percent of the sale price for all properties, except the first direct sale from a developer to buyer, which will remain at 2 per cent. It is understood that an official announcement on the change could come as early as this weekend.

“[The] idea is to curb flipping. It’s a good move. Keeps end users and longer term investors in the game,”  a well regarded Dubai developer told Arabian Business, adding: “Gets rid of brokers who put down checks [sic] against properties hoping to find buyers quickly.”

By law, the property transfer fee is paid equally by both buyer and seller, but industry spokespeople said in practice, the buyer usually ended up paying the full amount.

The increase to 4 percent means the charge on a AED2m home would double from AED40,000 to AED80,000.

The amount must be paid in full, in cash and cannot be incorporated into a mortgage.

The change appears to be in a bid to reduce ‘flipping’ – the rapid on sale of off-plan properties – by making it less attractive for buyers to purchase from such speculators, but it also has the potential to affect end users.

A property sold by an end user – such as someone who has lived in the home for several years and wants to upgrade or leave Dubai – to another end user still would attract the higher transfer tax.

At least one real estate agent said it would likely encourage end users to remain in their property for longer.

With more than $6bn worth of property and land transferred in the year to July, according to Dubai Land Department figures, the increased fees  could also see government coffers significantly enhanced.

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Shanthakumar 6 years ago

Doubt if this will stop flipping! The fee will just be added to the agents commission and the buyer or the seller will have to bear the cost! :-P

Michael 6 years ago

If they want to stop flipping then this should apply to off-plan only. Not good to apply this to proper end-user investors as it will deter the investment that is really needed - i.e. people who really want to remain in the market longer term.

Property Tycoon 6 years ago

Shanthakumar: Please can you explain how you reason your comments? I do not see how the agent can benefit from this.
Is there an axe to grind here ?

Izzat 6 years ago

I agree. It is just another way for the government to generate more revenue.

Spaced 6 years ago

This will not stop flipping - where assets are increasing 20%+ following release, it is a relatively small amount. Would be better to have implemented a sliding scale for off-plan sales which maybe starts at 20% reducing to 2% when the property is complete.

Jatin 6 years ago

We are considering buying a 3br property for us to live in with my family. I have arranged the mortgage and the required downpayment, now with this new rule, it means I have to shell out 40,000 more for that property. I am buying it from someone who has lived in it for 5 years and has paid up his mortgage, and wants to upgrade. I think this decision will pound the wheat along with the chaff. I don't think this will stop the flipping. The commissions, the transfer fees, the processing fees, are all just too high, it easily adds up another 5-6% over and above the downpayment amount. How can a genuine buyer afford all this? If Dubai wants serious home owners, and not speculators they have to think of making rules that encourage genuine buyers and discourage speculators. Not make a blanket rule like this. It makes no sense. Of course, I complete agree with the last paragraph of this article. I hope there is some hope left for buys like me.

Mark Renton 6 years ago

Unless the Land Department also has a foolproof way of forcing developers to register the sale with them as soon as the SPA is signed, the most likely effect will be that title deeds will now not be issued until handover is compelete, and speculators will now, if anything, concentrate even more heavily on off-plan properties than completed units. The result will be more flipping and higher costs for genuine end-users, the opposite of what the policy was supposedly intended to acheive.

Jatin 6 years ago

I agree with Micheal complete. Off-plan RESALE is where most of the flipping happens. There should be a condition that an investor can only buy if he can stay till the completion of the project.

ADJ 6 years ago

Would have made more sense to apply a progressive slab-based fee model. For e.g., 2% for property value up to AED 1M, 4% for 1M to 2M, 6% for 2M to 4M, 7-8% for 4M and above.

Most property of flipping nature falls in higher price brackets. Lower value property (affordable) usually tends to appreciate limitedly. And with progressive rates, every buyer would have to think twice with regards to anticipated appreciation since that would impact the applied transfer fee rate. As such, flipping could probably be contained better.

oldtimer 6 years ago

Note to the writer - this is a "fee" not a "tax" as indicated in para 5
Although it may be referred in other countries as tax, here as it remains a tax free country, it is referred to as a "fee".