Service charges are the recurring fee every owner pays for shared building costs: security, cleaning, lifts, pools, gym, AC chillers, insurance, and the reserve fund. They're quoted in AED per square foot per year and they hit your cash flow whether the unit is occupied or empty.
Typical ranges (AED/sqft/year)
- Budget mid-market (e.g. JVC, International City, Dubai South): AED 8-14.
- Mid-market (e.g. Business Bay, Sports City): AED 14-20.
- Premium (e.g. Marina, Downtown, Palm): AED 20-35.
- Ultra-luxury (e.g. Bvlgari Residences, One Za'abeel): AED 50-120+.
For a 1,000 sqft 1BR in Business Bay, expect AED 14,000-20,000/year. On rental income of AED 90-110k, that's 15-20% of gross, material to your cash-on-cash math.
What service charges actually cover
- Common-area maintenance. Lobbies, corridors, lifts, parking, landscaping.
- Utilities for shared infrastructure. Chiller plants, pool heating, common lighting.
- Security + concierge. 24-hour staff + access control.
- Insurance. Building structure insurance (not contents).
- Reserve fund. Forward-saving for major works (façade repair, lift replacement). 5-10% of total charge typically goes here.
- Management fee. The Owners Association's facility-manager contract (RERA-registered). 10-20% of total.
What they do NOT cover
- Your unit's interior maintenance (AC service inside, paint, plumbing).
- Utilities you consume (DEWA: electricity + water).
- Internet / TV (Du or Etisalat).
- Property tax, Dubai has none on residential.
How to evaluate a project's service charge
- Get the developer's projected charge in writing before signing the SPA. It's an estimate but it's what gets billed in year 1.
- Compare against the building category. A new luxury tower at AED 16/sqft is suspiciously cheap (probably under-provisioned). A budget tower at AED 28/sqft is wildly over-priced.
- Check the developer's track record. Some developers (Emaar, Sobha, Nakheel) manage charges well. Others (lower-tier) let charges drift up 20-40% over the first 3 years.
- Ask about the reserve fund. If it's under 5% of total charge, the first major repair will hit owners with a special assessment.
Common traps
- First-year discount, year-2 spike. Developer subsidizes service charges in year 1 to make handover smooth, then doubles them year 2. Common in budget towers.
- Pool / gym / amenity over-build. A 200-unit tower with a 50-meter lap pool and 3 cinema rooms looks great in the brochure and costs you AED 30/sqft to maintain.
- Bad façade choice. Glass curtain walls are stunning and expensive to clean + reseal. Stone/composite façades cost a third as much to maintain.
How service charges interact with rental yield
If a unit lists at 8% gross yield and service charges are 2% of property value annually, your net is 6% before vacancy + management fees. Always quote yields net of service charge when comparing projects.
Bottom line
Service charge is the second-biggest ongoing cost after mortgage (if any) and it doesn't go away. Pick projects where the developer has skin in the game, typically those that own and operate adjacent buildings of similar tier.
