How VAT Affects Home Ownership and Renting in Dubai


As a UAE resident, one of the biggest financial decisions you’ll face is that of buying or renting a home. Owning a home involves a huge investment, and even tenants have to set aside a large portion of their income for the monthly rent and other recurring expenses. That’s why many people are eager to learn about how real estate transactions and associated costs have changed after the implementation of VAT. This handy guide by the experts at ServiceMarket, the UAE’s leading marketplace for home services, will help you navigate the application of VAT on home ownership and renting.

Buying a home

There’s good news for those who are planning to buy a home in the UAE. You won’t have to pay any VAT on the retail price of residential buildings. Since the first supply of residential buildings will be zero-rated for three years after their completion, which means that developers will be able to recover the VAT associated with development costs, real estate prices are not likely to be affected significantly. If you’re a UAE citizen and plan to build the home yourself, then the 5% VAT you face during the process will be recoverable. In addition, the purchase of bare land is exempt, but VAT will apply to land with infrastructure. However, buyers of commercial buildings will have to pay 5% VAT.

Mortgage from the bank

The business of lending is generally exempted from the newly introduced VAT, so it won’t be applicable to your home loan repayment and interest rate. But you can expect to face 5% VAT on some aspects of it like the processing fee. The commission you pay to your broker is also likely to be subject to 5% VAT.

Registering a home

As a rule of thumb, VAT won’t apply to government fees unless they are generated by a commercial activity. So, it is not likely to be applicable to Dubai Land Department (DLD) fees such as the title registration fee and administrative fee.

Home insurance

With the exception of life insurance, all types of insurance including the coverage of your home are subject to VAT. You should budget for 5% VAT on the gross premium of your home insurance. It applies to both building insurance and home contents insurance. Keep in mind that you will have to pay VAT everytime you renew your home insurance.

Renting a home

No VAT will be applicable to the rent if the tenant leases the residential building for more than 6 months or has an Emirates ID. While VAT won’t apply to residential rents directly, landlords might increase rental prices to make up for expenses they face due to VAT. It will also be applied to the services rendered by your broker/real estate agents that are registered for VAT. The costs involved in registering your tenancy contract with Ejari are not likely to be affected by it.

Consumption costs

You can expect to see an increase in your DEWA bills since 5% VAT is applicable to all forms of energy, including gas and electricity as well as supply of water. District cooling charges are also subject to it. Both wired and wireless telecommunications and electronic services will be affected by VAT, which means that you can expect to see an increase of 5% in your internet, TV and phone bills.

Moving, maintenance, and recurring service costs

Be prepared to spend more money to keep your home clean and well-maintained because 5% VAT is applicable to home services like cleaning and maintenance. What’s more, when moving to a new home, not only will you have to pay VAT on the services rendered by your real estate agent but also on moving services. It is mandatory for companies with a revenue greater than AED 375,000 per year to register for VAT. For those companies that have a revenue below this but higher than AED 187,000, it is optional. Another increased expense homeowners should budget for is the 5% VAT on recurring service costs such as the service charges they pay to their building/property manager.


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