Playbooks / Property
Net rental yield in Dubai
What is the real net rental yield on a Dubai apartment?
Every figure computed by the page's own model. The first is the number in the listing; the last is the number that reaches your account, after the service charge, management, vacancy, maintenance and insurance, and after the transfer and agency costs are added to what the property cost you.
The rule
Gross yield is a marketing number. It divides annual rent by the purchase price and stops, which means it silently assumes two things that are never true: that you paid only the price, and that the rent arrives without deductions.
Every competing page on this query fixes the second assumption and waves at the first. The strongest of them publishes yields by community and cites nothing at all. The rest list "DLD 4%, agency 2%" as round numbers, without naming the instrument that sets either, and without saying who the instrument makes liable. That last omission is worth money, and it is where this page starts.
What the Land Department actually charges
The fees are not a market convention. They are a schedule, approved by Executive Council Resolution No. (30) of 2013, and the Schedule's own words for registering a sale are 4% of the value of the sale contract. Registering a mortgage is 0.25% of the mortgage (debt) value. The flat fees are published on the Land Department's own service pages, which is the only place several of them appear at all: AED 250 Title Deed Certificate Issuance Fee, AED 250 for the map on villas and apartments, AED 10 knowledge fee and AED 10 innovation fee.
The trustee office is a service partner rather than the Land Department, so its fee carries VAT where the registration fee does not. The threshold, in the Land Department's own words, is AED 4,000 + VAT If the sale value is AED 500,000 or more and AED 2,000 + VAT If the sale value is less than AED 500,000. Article 3 of Federal Decree-Law No. (8) of 2017 says the standard rate of the tax to be levied on any supply or importation shall be (5%).
Take an illustrative one bedroom at AED 1,500,000, 900 square feet, let at AED 105,000 a year. Buying it cash:
| Line | AED | Set by |
|---|---|---|
| Land Department registration fee | 60,000 | Resolution 30 of 2013, Schedule |
| Agency commission, with VAT | 31,500 | Contract, VAT under Decree-Law 8 of 2017 |
| Registration trustee, with VAT | 4,200 | Land Department service page |
| Title deed certificate | 250 | Land Department service page |
| Map, apartments and villas | 250 | Land Department service page |
| Knowledge fee | 10 | Land Department service page |
| Innovation fee | 10 | Land Department service page |
| Total | 96,220 |
That is 6.41% of the price, before a tenant has viewed the property, and none of it is recoverable on exit.
The 4% is not a buyer's fee
Article 3 of the resolution says that unless agreed otherwise, the fee for the sale of real property will be shared equally by the seller and purchaser. The Land Department's own service page prints it exactly that way: 2% of the sale value from the seller, and the same again from the buyer.
The Dubai convention is that the buyer pays all 4%. That convention is a term of the sale contract, not a rule of law, and the resolution's equal split is what applies when the contract is silent. On this one bedroom the seller's statutory half is AED 30,000. Carried by the seller instead, the same property nets 4.41% rather than 4.33%.
Two honest qualifications. The convention is close to universal, the standard Form F allocates the fee, and a buyer who opens this in a hot market will usually be told no. But it is the largest single negotiable line in the stack, it is larger than the entire agency commission, and a buyer who does not know the default exists cannot ask.
The rent, after the building has taken its share
Vacancy comes off first, because management is a share of rent actually collected, not of rent hoped for.
| Line | AED |
|---|---|
| Annual rent | 105,000 |
| Vacancy allowance | 8,077 |
| Service charge | 16,200 |
| Management, on rent collected | 4,846 |
| Maintenance reserve | 5,250 |
| Insurance and fixed costs | 1,500 |
| Net operating income | 69,127 |
The service charge here is 900 square feet at AED 18 a foot. That rate is an illustration, not a published figure. Dubai has no per building service charge series this site is willing to quote, which is precisely why the service charge is the cost buyers under-model: it never appears in the listing, and it is the input the answer is most sensitive to. It is also not the only fixed cost a listing omits: in a tower served by a district cooling plant the capacity charge is billed on contracted capacity rather than on use, so it runs whether the flat is cooled or let, and the chiller bill prices it per square foot so it can be set beside this one.
Three yields, and the one nobody names
| Yield | Value | What it divides by |
|---|---|---|
| Gross | 7.00% | The price |
| On price, after running costs | 4.61% | The price |
| Net | 4.33% | The price plus 96,220 of costs |
The middle row is the one no competing page prints, and it is the one that settles the argument everybody has. Running costs take 2.39 percentage points of yield. The entire transaction stack, the 4% and the agency commission and the trustee and the rest of it, takes 0.28 percentage points.
Running costs are 8.5 times more destructive than the transaction stack, and the transaction stack is what every buyer negotiates over. The reason is structural rather than moral: the transaction is a one off on the denominator, and the running costs come out of the numerator every single year. A buyer who saves AED 10,000 on commission and then buys into a tower whose service charge runs three dirhams a foot above the one next door has made a bad trade, and made it in the first hour.
How long the costs take to earn back
At this net operating income, the acquisition stack is 1.39 years of net rent.
Selling adds the agency commission again, AED 31,500 at the same price, and on the same convention no share of the registration fee. A developer no objection certificate also falls due; it is set by the developer, published nowhere centrally, and therefore deliberately absent from this arithmetic rather than guessed at. Ignoring it, the round trip is 1.85 years of net rent, at an unchanged price.
That number is only useful next to a holding period. This site publishes the official Dubai Land Department residential sale index in full on the Dubai price index page, and the series shows that after the May 2015 peak it took 85 months, just over seven years, to get back above it. A round trip that costs close to two years of net rent is survivable over a decade and expensive over three years, and the decision about which one you are doing is made before the offer, not after. Transaction costs and the minimum hold period computes the full round trip with a mortgage on both sides, and tests the usual advice to hold for the long term against what the index actually did.
The number the listing never carries
Holding everything else constant and moving only the service charge rate:
| Service charge, AED per sq ft | Net yield |
|---|---|
| 12 | 4.67% |
| 15 | 4.50% |
| 18 | 4.33% |
| 21 | 4.16% |
| 24 | 3.99% |
| 27 | 3.82% |
| 30 | 3.65% |
Three dirhams a foot is 0.17 percentage points of net yield on this property, every year, forever. At AED 24 a foot this one bedroom drops below 4.00% net, which is roughly where a buyer should start asking what the money is buying that a cheaper tower does not.
This is why a per building service charge figure is worth more than any yield table by community, and why ranking buildings by cap rate without the service charge attached is ranking them by their listings.
If you borrow
Registering the mortgage is a second transaction with its own fee, its own title deed and its own trustee. The Land Department's mortgage service page prices the trustee at AED 4,000 service fee plus VAT. At 75% loan to value on this property, a loan of AED 1,125,000:
| Line | AED |
|---|---|
| Mortgage registration fee | 2,813 |
| Registration trustee, with VAT | 4,200 |
| Title deed certificate | 250 |
| Knowledge and innovation fees | 20 |
| Total | 7,283 |
Small against the 4%, and beside the point. What debt changes is not the acquisition stack but the shape of the return, and the figure that describes your position then is cash on cash rather than net yield, with break-even occupancy as the risk measure. How much you can borrow is a separate question again.
What this page cannot tell you
It cannot tell you the achieved rent, only the asking rent you were shown. It cannot tell you next year's service charge, because the owners association sets it. It cannot tell you what the property will be worth, and a net yield says nothing at all about that. And if the property comes with a tenant already in it, the rent you inherit may be capped for years by the rent increase ladder, which is a materially different asset from the same unit bought vacant.
What it does tell you is the denominator, with the instrument behind every line of it. Run your own figures, then read what it costs to get back out before you decide the yield is enough.
The resolution and the Land Department pages behind every line of the fee stack are listed, with what each sets in its own words, on the Dubai property law register.
The arithmetic
Where it breaks
- It says nothing about capital growth. A four percent net yield in a market rising six percent a year and a four percent net yield in a market falling six percent a year are not the same investment.
- Service charges are not fixed. Owners associations raise them, and a tower with an ageing chiller or a disputed developer handover can see a step change that removes a full percentage point of net yield overnight.
- The rent input is the achieved rent, not the asking rent. Using the asking rent quietly rebuilds the same optimism the gross yield had.
- It is an annual snapshot. It does not handle a rent free period, a fit out cost, or the years of below market rent that the rent increase caps can lock you into once a tenant is in place.
- On a leveraged purchase the net yield on total outlay and the cash on cash return diverge sharply. Look at both or you will misjudge how much risk the debt is carrying.
- The fee schedule is the current one. Fees in Dubai are set by resolution and can be amended by resolution, so a figure here is only as good as the date at the top of this page.
When to use it
Before any offer on an income producing property, and on every property already in your portfolio at least once a year. If you have never calculated it on something you already own, that is the first calculation to run.
The Net Rental Yield does this arithmetic for you, in your currency, in about thirty seconds.
Open the calculatorSources
- Executive Council Resolution No. (30) of 2013 Approving Fees of the Land Department, Article 3 and Schedule
- Dubai Land Department, Property Sale Registration, service fees
- Dubai Land Department, Mortgage registration application, service fees
- Federal Decree-Law No. (8) of 2017 on Value Added Tax, Article 3
- RERA rental index and rent increase tiers
Last reviewed . Commercial relationship disclosure: the author works in Dubai real estate brokerage. See the disclosure standards. Disclosure standards.