How Dubai Service Charges Affect Rental Yield
Dubai service charges come straight off your rent, so they lower your net rental yield. In most Dubai buildings the owner, not the tenant, pays the annual service charge, which is set per square foot and approved through RERA's system. On an example AED 1.5 million apartment renting for AED 110,000 a year, a service charge of AED 18 per square foot on 1,000 square feet cuts the yield from 7.3% gross to about 6.1%, before any other costs.
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This is general information, not financial advice. Service charges differ by building and year; check the approved figure for your exact project before you buy.
Where to find the real number
The Dubai Land Department runs a Service Charge Index through its Mollak system. You can look it up on the DLD website (dubailand.gov.ae) or in the Dubai REST app: choose the project, the use (for example residential) and the year, and the approved service fees are shown. Use this instead of a broker's estimate.
Also ask the seller for the last two years of service charge invoices and confirm there are no unpaid balances. Arrears can block the transfer.
Worked example (example numbers)
Apartment: 1,000 sq ft, price AED 1,500,000, rent AED 110,000 a year.
Gross yield: 110,000 / 1,500,000 = 7.33%
After service charges at AED 18 per sq ft:
- Service charge: 18 x 1,000 = AED 18,000
- Net of service charge: 110,000 - 18,000 = 92,000
- Yield: 92,000 / 1,500,000 = 6.13%
The service charge alone takes about 16% of the rent (18,000 / 110,000).
After other running costs (example figures):
- Maintenance and repairs: AED 3,000
- One month empty a year: AED 9,167
- Property management at 5% of rent: AED 5,500
- Landlord insurance: AED 800
Net income: 110,000 - 18,000 - 3,000 - 9,167 - 5,500 - 800 = AED 73,533
Net yield: 73,533 / 1,500,000 = 4.90%
That is about 2.4 points below the headline 7.33%. For a fair figure, also add your purchase costs (around 6% to 7% in Dubai) to the price in the denominator.
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How the charge rate changes the answer
Same apartment, different service charges (gross yield after service charge only):
| Service charge per sq ft | Annual charge | Yield after service charge | |---|---|---| | AED 12 | AED 12,000 | 6.53% | | AED 18 | AED 18,000 | 6.13% | | AED 25 | AED 25,000 | 5.67% |
Luxury towers with pools, gyms, concierge and large common areas tend to charge more. The rent does not always rise to match.
Other charges to check
- District cooling (chiller) fees. In some buildings these are billed separately. Check whether the tenant or owner pays the fixed capacity charge.
- Sinking or reserve fund. Part of the service charge often funds future major works.
- Master community fees in some developments, on top of the building charge.
- Short-term letting. Holiday-home permits and higher furnishing and cleaning costs change the maths.
Common mistakes
- Using the developer's launch estimate for an off-plan unit. Real charges are set later and often differ.
- Comparing gross yields between a low-charge building and a high-charge one.
- Forgetting the charge is on the full built-up area, including balconies, depending on the project's terms.
- Not checking for arrears before transfer.
- Assuming the tenant pays. In Dubai the owner usually does.
The full yield section, with net yield, cash-on-cash and a worked Dubai deal, is in Real Estate: Everything You Need to Know.
FAQ
Who pays service charges in Dubai, landlord or tenant?
Usually the landlord (owner). The tenant usually pays utilities such as DEWA. Your tenancy contract sets the details.
Can service charges go up?
Yes. Budgets are set each year and approved through RERA's system. Look at the trend in the index, not only this year's figure.
What is a "good" service charge?
There is no single number. Judge it against the rent: the lower the share of rent it takes, the better for yield.
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