How will the recent instruction by The UAE’s Central Bank to banks to stop financing DLD registration fees of 4% and agent’s fees of 2% affect the end-users in the affordable housing market?

Compiled by: Binesh Babu Panicker 

Mohanad Alwadiya, CEO, Harbor Real Estate
The UAE Central Bank’s directive to stop financing DLD registration fees (4%) and agent fees (typically 2%) will likely place added pressure on end-users, mostly in the affordable housing market. These fees, amounting to approximately 6% of the property price, will now need to be paid upfront, increasing the financial burden on buyers, particularly first-time homeowners and those with limited savings. For instance, on a property worth AED 1m buyers would need an additional AED 60k in cash (on top of the down payment and NOC fees, annual service charges and typical moving / relocation expenses), which could push some out of the market or delay their purchase plans. This is especially impactful in the affordable housing segment, where budgets are tight, and buyers rely heavily on financing to manage costs. So, in the short term, we might see a dip in transactions, as buyers reassess their affordability. However, I expect developers and sellers could step in with incentives, such as covering part of these fees, or simply add up these expenses in the sale price to maintain demand and address this new trend. Having said that long term, this change may promote better financial planning among buyers, but it may make entering the property market more challenging for many.

Mark Castley, CEO of Real Estate, Huspy

I think this is fantastic for the market and it makes a lot of sense. The UAE Central Bank always makes positive moves for the market. To me, this is a positive move and what this suggests is that we can continue with an upward trajectory without the fees being financed. Although it was good for buyers to have such an option, I don’t believe it’s needed anymore for the market to keep growing.

Luke Remington, Managing Director, haus & haus

I can’t imagine there will be a significant effect – however it may mean buyers with limited deposits have to look for slightly cheaper properties without the extra loan to value percentage.

Umar Bin Farooq, Founder & CEO, One Broker Group

The recent directive from the Central Bank of the UAE (CBUAE) instructing banks to cease financing the Dubai Land Department (DLD) registration fee of 4% and agent’s fee of 2% is poised to have notable implications for end-users in the affordable housing market. Increased Upfront Costs: Previously, many banks included these fees within the mortgage financing, allowing buyers to distribute the cost over the loan tenure. With the new directive, buyers must now cover these fees upfront, increasing the initial financial burden. For affordable housing, where buyers often operate within tight budgets, this change could pose significant challenges.

Potential Impact on Homeownership Accessibility: The requirement to pay additional upfront costs may deter potential buyers, particularly first-time homeowners, from entering the market. This could lead to a slowdown in the affordable housing sector, as fewer individuals can afford the initial expenses associated with purchasing a property. Market Adjustments: Developers and sellers might respond to this change by offering incentives, such as covering a portion of the DLD registration or agent’s fees, to attract buyers. Alternatively, there could be increased demand for properties with lower associated fees or in areas where such costs are more manageable. Financial Planning Considerations: Prospective buyers will need to engage in more meticulous financial planning, ensuring they have sufficient savings to cover these upfront costs. This may also lead to a greater reliance on personal loans or other financing methods to manage the initial expenses, potentially increasing the overall cost of homeownership. In summary, while the CBUAE’s directive aims to regulate financial practices within the banking sector, it introduces additional financial challenges for end-users in the affordable housing market. Stakeholders, including buyers, developers, and financial institutions, will need to adapt to these changes to maintain the accessibility and attractiveness of affordable housing options.

Abdullah Alajaji is the CEO of Driven Properties

This decision by the UAE’s Central Bank is a positive step forward. By reducing the overall Loan-to-Value (LTV) ratios, it enhances the stability and resilience of the sector. When LTV ratios are lower, properties are better protected against market fluctuations, making them more defensible in uncertain times. Also, this move promotes fairness across the market. Previously, some banks would finance registration and agent fees based on individual profiles, creating inconsistencies. With this policy applied uniformly, all market participants are treated equitably, fostering a more transparent environment. Finally, this change reduces the risk on banks’ balance sheets by lowering their exposure to mortgaged properties. It also improves the liquidity rates of banks across the UAE, contributing to a healthier and more robust banking sector. This is especially important for the property market, which plays such a significant role in the country’s economy.