Breakdown
How it works
Owners pay an annual service charge per square foot covering security, cleaning, pool and gym, insurance, chiller capacity and a sinking fund. Rates range from AED 3 (older villas) to AED 30+ (prime towers). On a yield calculation they come straight off the top — a 20% service-charge-to-rent ratio turns a 7% gross yield into 5.6% net before anything else.
Formula
Worked example
1,100 sq ft at AED 18: AED 19,800 a year (AED 4,950 a quarter) = 21% of AED 95,000 rent.
Frequently asked questions
Can the service charge increase?
Yes, with RERA approval of the annual budget. Mollak publishes the approved rate; check the trend before buying.
Does the tenant pay it?
No — the owner pays service charges. Tenants pay DEWA, chiller consumption (if metered) and the housing fee.
What is the sinking fund?
A reserve (usually 10–15% of the budget) for major replacements — lifts, façades, chillers. Buildings with weak sinking funds face special levies.