A Detailed Breakdown on Hidden Cost When Renting Property in Dubai

When leasing a property in Dubai, the emphasis often revolves around the annual rent. However, various hidden costs often take tenants by surprise and can encumber financial planning. The additional cost of renting property in Dubai affects overall expenses, especially those new to Dubai's rental market.

You can stay at ease with our in-depth analysis and breakdown of the hidden costs that will prove effective for your rental pathway in Dubai. Whether leasing a spacious villa on the outskirts or a sophisticated apartment in the city's enviable locations, navigating the hidden cost is essential for renters to avoid financial distress. This blog post aims to unveil hidden costs like agency fees, security deposits, maintenance costs, and other expenses to prepare you for a stress-free rent life in Dubai.

Significant Expenses when Renting Property in Dubai

Individuals are advised to factor in the expenses when evaluating the cost of renting in Dubai beyond what is advertised. Many renting costs are not initially anticipated but still crucially affect overall financial planning. Let's delve into the key costs or hidden expenses that should be prioritized before finalizing a rental contract.

Security Deposit – A Binding Condition

Security Deposit is an obligatory stipulation when renting a property in Dubai. Property owners typically demand this deposit as coverage against unpaid rent or potential damage. However, it is effective to know that the security fee is refundable at the contract's end or when the tenants vacate the property, provided the property is not potentially damaged during the lease period.

Tenants are advised to document the security deposit's refund clause precisely to avoid conflicts with the landlord, as such disputes are frequently observed. The security deposit could be on par with monthly rent, but usually, it equates to;

• Ten percent for furnished units.
• Five percent for unfurnished residential spaces.

Ejari Registration – A Compulsory Documentation Charge

Ejari System is a recently launched initiative of the Dubai Land Department (DLD) to supervise and monitor the Dubai rental market. When renting a property in Dubai, registering a tenancy agreement with Ejari adds to the legal essentialities. Numerous online sources and authorized centers are available to pay the Ejari registration fee.

In most cases, the Ejari registration fee is charged to tenants. This further guarantees the legal binding of the tenant contract on both parties, putting landlords and tenants under a legal protection system.

• The Ejari Registration Fee varies by around AED 100.
• AED 10 for Knowledge Fee
• AED 10 for Innovation Fee.

While not a sizable amount compared to other additional costs, this hidden cost still serves as a fundamental charge to start your tenancy journey.

Agency Fee – Professional Assistance Comes at a Cost

Dubai's real estate world is thriving, thanks to the real estate agents, one of the remarkable actors whose role is as significant as others in the property market. Besides helping tenants find properties, real estate agents in Dubai are proficient in handling paperwork and negotiating rental clauses.

However, help comes at a price, often five percent of the annual rent, although charges may increase based on agencies' expertise and reputation. Remember, agency fees are non-refundable, and a significant part of hidden charges must be included in the initial budget planning.

• AED 5,000 agency fee will be charged if the annual rent is AED 100,000.
  Tip: Hire registered real estate agents to prevent unnecessary scams or surplus fees.

DEWA Charges and Connection – Exclusive of Utilities

Dubai Electricity and Water Authority is wholly responsible for water and electricity connections and services for residents around the city. The cost associated with DEWA is one of the hidden and essential requirements needed when moving into a new property.

Tenants must set up a DEWA account, and an initial deposit is required. However, tenants will be glad to learn that the DEWA security deposit will be reimbursed upon vacating the property and after settling all the bills.

Moreover, tenants are also advised to budget for their monthly DEWA bills, which vary depending on consumption. Prior budgeting for DEWA utility bills is crucial to avoid financial pitfalls, as this additional cost significantly affects living expenses.

The initial deposit for the DEWA connection is as follows;

• AED 4,000 for villa properties
• AED 2,000 for apartment units
  The monthly electricity and water bills can also range between AED 500 and AED 1,500.

Housing Fees – Municipality Charges Obligatory Upon Tenants

Housing fees are among the least obvious hidden costs when leasing a property in Dubai. This fee is commonly known as the Dubai Municipality Fee. The charge applies to all tenants and residents and is payable through your DEWA bills paid per month. While not heavily advertised, the Dubai Municipality Fee still affects the overall budget planning.

For instance, if the annual rent is AED 100,000, the Dubai Municipality Fee will be AED 5,000. This amount will be settled into small monthly payments for a year, averaging around AED 416 per month. This implies that the housing fee is as follows;

• A five percent of the yearly rent.

Moving Costs: Avoid Damage and Hire Professionals

Adding moving costs to the budget is one requirement when renting a property in Dubai. Tenants and residents often hire professional movers who safely shift their belongings without damaging the building's infrastructure.

This cost often escalates the budget with an addition of AED 500- AED 1,000. However, the costs may increase in the case of supplementary services like insurance or unpacking.

Cooling Charges- Chiller Expenses to Consider

Air conditioning costs are one of the elementary hidden charges when renting a property in Dubai. Owing to Dubai's sweltering climate, most apartment units and complexes charge this implication.

In Dubai, cooling expenses are charged separately, unlike in other cities, where these charges are associated with bills or rent. Usually, these charges depend on the apartment's size and cooling provider and may float between AED 300 and AED 1,000 every month.

However, some properties feature chiller-free options, and in most cases, knowing whether your property is chiller-free is significant to prevent surprise fees down the line.

Maintenance Charges: A Supplementary Responsibility

The condition of covering major maintenance issues and structural refurbishments often comes under the landlord's responsibility. However, Dubai's tenancy laws stipulate a clause where tenants hold minor repairs and maintenance coverage.

Minor maintenance expenses include plumbing issues, repainting a few areas of the property, and electrical repairs. These costs can amplify over time and should be factored into financial planning when considering the additional costs of renting a property in Dubai.

Tip: To minimize expenses, ensure your tenancy contract clearly stipulates the responsibilities of repairs and maintenance.

Additional Hidden Costs when Renting a Property in Dubai

While the essential costs haven't been covered, let's explore additional charges to add to your budget when renting a property in Dubai. Such expenses include;

Parking Charges: Not A Compulsion

Although Dubai's intelligent developments and fully integrated services have ample parking facilities, this is not inclusive to all. Some apartment complexes do not provide free parking facility parking spaces or attach parking fees with the rental cost. In other cases, older buildings in Dubai lack parking facilities, and residents have to rent a place in a nearby garage or parking lot, which adds up to the budget.

Tip: If you own a car, make sure that your tenancy contract includes a designated parking spot!

Appliances and Furniture: Furnish your Rental Space

Although new properties in Dubai come fully furnished, several are rented out semi-furnished or fully unfurnished. In that case, proper budgeting is required to furnish the property. The cost of furnishing is highly affecting, specifically if you're starting from scratch.

Property furnishing differs in expenses and largely depends on preferences. For instance, basic furniture for a one-bedroom apartment can add around AED 20,000 to AED 30,000 to your budget, whereas high-end furniture can push expenses beyond the limit. Budgeting for kitchen appliances is also essential, as many rental properties exclude them.

TV and Internet Connection: Basic Utilities for Modern Living

With the advanced pace of the world, internet and TV connections are essential, and their budgeting will prevent you from unexpected expense surprises. Companies like Du and Etisalat are key mobile packages, internet services, and television connection providers.

The set-up connection can cost tenants around AED 400 to AED 1,000; however, the type of package may result in an increase or decrease in proposed costs. Moreover, it is crucial to check if the complex has partnerships or restrictions because this could certainly limit your options while increasing the costs. Also, remember that monthly TV and internet service bills depend on the speed limit and channel subscriptions.

RERA Rent Adjustments: Unexpected Increase

The Dubai Real Estate Regulatory Authority (RERA), which is responsible for governing and monitoring Dubai's rental market, sets the rental guidelines. However, even with these regulations in place, tenants still face an increase in leases in certain circumstances. This often occurs when the tenancy contract is up for renewal or the market conditions fluctuate.

Awareness of RERA guidelines plays a crucial role in budget planning to stay prepared for any accidental rent hikes. Though rental prices are capped by law, they can still be a financial burden, specifically if a property is rented in a highly demanding area.

VAT on Services: A Surprise Addition to Renting Costs

The UAE has introduced a 5% Value Added Tax (VAT) in 2018. However, rental payments are exempt from such taxes, yet other services like maintenance fees, agency charges, and utility bills are included in VAT. While it will only increase the cost of renting in Dubai by a few percentage points, the planning beforehand is still significant.

Gas Connection Fee

Tenants may also need to set up a gas connection account apart from chiller and DEWA links. This is certainly applicable to older apartments where gas connection is required for cooking and other purposes compared to newer properties where electric stoves are used. A gas connection setting can add around AED 500 to AED 1,000 to the renting figures, depending on the provider.

Additional Advice for Savvy Tenants in Dubai

Negotiate Lease and Additional Charges

Due to the heightened competitiveness of Dubai's real estate market, landlords often settle to negotiate rent prices and additional fees. You might get an edge with lower rents if you rent a property during a market downturn or a long-term renter. Sometimes, tenants can request landlords cover minor maintenance and chiller fees. Remain watchful when exploring any room for negotiation with the landlord or real estate agent.

Choose Appropriate Time to Lease

The perpendicular variations are obvious in Dubai's real estate market. However, stay perpetually aware as rent prices hike during the peak moving season (summer months) and reduce during the off-season (winter months). Try renting a property during the off-peak season if you have flexible moving dates, as landlords are likely to offer concessions during winter.

Opt for a Highly-Maintained Living Space

When considering renting a property in Dubai, try to opt for new developments or recently renovated properties. Choosing such properties will result in fewer maintenance issues and costs, lessening the burden of minor renovations that may often come under the tenant's responsibility.

Review Inclusions in the Tenancy Contract

It is crucial to verify what the lease agreement contains. Some landlords offer the privilege of covering DEWA bills, chiller fees, and maintenance costs within the rent. Therefore, it is necessary to go through the lease to avoid unforeseen additions to the expenses.

Research Communities

Dubai's dynamic variety of neighborhoods also varies in cost of living. For example, renting a property in desirable areas like Dubai Marina or Downtown Dubai might include higher additional charges, while newly developed neighborhoods, including Al Barsha and Jumeirah Village Circle (JVC), have lower expenses but longer commutes.

Prepare for Renewal Regulations

It is crucial to stay informed about your area's rental rates, especially at the time of renewal. For this purpose, tenants can use the Dubai Land Department's RERA rental index calculator to double-check the legal limit of rent hikes. This knowledge will help them settle on better terms that might result in an affordable cost of living.

Closing In!

Renting a property in Dubai seems like a simple process; however, the charges go beyond expectations, with numerous hidden additions attached. Tenants are required to consider the additional cost of renting a property in Dubai to prevent any unforeseen expenses later. Tenants can comfortably manage the cost of living in Dubai when the hidden costs are keenly planned, and the lease agreement is carefully reviewed.

If you're shifting your renting journey to a property proprietorship, consider navigating the fees while buying property in Dubai. As for tenants, the overall cost of renting in Dubai can be higher than initially anticipated because of the expense of deposits, utility bills, agency fees, and other additional costs. Realistic budgeting is essential to comfortably accommodate in a dynamic city like Dubai!