Gross vs Net Rental Yield in Dubai: What Service Charges Really Do

What a Gross Yield Actually Measures

Gross rental yield is a simple calculation. Annual rent divided by purchase price, expressed as a percentage. That is the whole of it, and it deducts nothing.

Every Dubai yield figure in circulation is gross, including the 6.5 to 7 percent citywide range and the community figures published by the portals. None of them is what an owner receives.

This is not deception, it is convention, and the same convention applies to Indian yield figures, which is why the comparison between them is still fair. But an investor budgeting on a gross number is budgeting on the wrong one.

The gap in Dubai is meaningful and reasonably predictable. Between 1.5 and 2.5 percentage points typically separates gross from net, so a 7 percent gross yield lands realistically between 4.5 and 5.5 percent net. This guide sets out exactly where those points go. All returns discussed are historical or projected by third parties, and neither guarantees future performance. Verify current market data before acting, and treat this as general information rather than advice.

Service Charges: The Big One

The largest deduction, and the one Indian buyers most consistently underestimate, is the annual service charge. Indian society maintenance is typically far lower relative to property value, so the instinct carried over from an Indian flat is badly calibrated.

Dubai service charges are levied per square foot per year and vary sharply by segment. Villas and townhouses are lightest at roughly AED 2 to 6 per square foot, reflecting fewer shared facilities. Affordable apartment communities run around AED 8 to 16, mid-market towers around AED 13 to 18, and luxury buildings around AED 18 to 30. Super-prime addresses go considerably higher, with Burj Khalifa reported near AED 68.

Work it on a real example. A 1,000 square foot mid-market apartment at AED 15 per square foot carries AED 15,000 a year. Against a purchase price of AED 1.5 million, that is one full percentage point of yield gone before anything else is deducted.

The variation between buildings within the same community is the part to watch. Two towers in the same district can differ substantially, and a building with an unusually high charge quietly erodes returns for as long as you own it. RERA publishes a Service Charge Index by building through the Dubai Land Department, and checking the actual figure for a specific tower is one of the highest-value checks available before you buy.

Letting, Management and Voids

Three further deductions follow, and together they account for most of the remaining gap.

Agency letting commission is customarily around 5 percent of the annual rent, charged on each new letting. If a tenant renews, you avoid it that year; if they leave, you pay it again. Property management, if you outsource it, typically runs 5 to 10 percent of annual rent. For an owner sitting in India rather than Dubai, management is realistically a necessity rather than an option, so that cost should be assumed rather than treated as avoidable.

Void periods are the deduction people forget entirely. One month vacant is roughly 8 percent of a year's rental income gone, and in a market where roughly 120,000 units were scheduled for 2026 delivery, void risk is higher than it was during the shortage years. Budgeting for full occupancy every year is optimistic.

Then there are the smaller items: maintenance and repairs, periodic refurbishment between tenants, and the cost of furnishing if you let furnished. Ejari registration and administrative costs are modest but real.

A housing fee of 5 percent of annual rent also sits on the utility bill in Dubai, though it is customarily borne by the tenant rather than the owner. Worth knowing it exists rather than being surprised by it.

Working a Real Example

Put the deductions together on a concrete case and the arithmetic becomes clear.

Take a mid-market apartment bought at AED 1.5 million, 1,000 square feet, let at AED 105,000 a year. That is a gross yield of 7 percent, comfortably within the range Dubai is quoted at.

Deduct a service charge at AED 15 per square foot, or AED 15,000. Deduct management at 7 percent of rent, roughly AED 7,350. Amortise a letting commission of 5 percent across an average tenancy, call it AED 3,000 a year. Allow one month of vacancy every three years, roughly AED 2,900 a year. Set aside AED 3,000 for maintenance.

That is around AED 31,250 of annual cost against AED 105,000 of rent, leaving roughly AED 73,750. Against the AED 1.5 million purchase price, the net yield is about 4.9 percent, and the purchase price itself understates your true cost basis because transaction fees of 6 to 8 percent sat on top at acquisition.

So a 7 percent gross became a shade under 5 percent net, which is exactly the 1.5 to 2.5 point drag the market convention implies. That number is still respectable, and it is not the number in the brochure.

Then Indian Tax

For a resident Indian, one more deduction applies and it is the largest single one after service charges.

Dubai rental income is taxable in India at your slab rate for a resident, assessed under Income from House Property after a standard 30 percent deduction, and the India-UAE treaty produces no credit because the UAE levies no personal income tax to offset. The detail is in our guide to Dubai rental income and Indian tax.

Apply that to the example. A net rental income of roughly AED 73,750, about ₹17.7 lakh, is taxed in India after the standard deduction, and for a top-bracket buyer the effective yield after Indian tax lands somewhere around 3 to 4 percent on the original purchase price.

That is the honest number for a resident Indian investor buying to let. It is still well ahead of the 2 to 3 percent gross typical of Mumbai or Delhi NCR, and the Indian comparison would suffer its own deductions and taxes, so the relative advantage holds even as the absolute figure comes down.

The practical lesson is to underwrite the purchase on this number rather than the headline. Ask for the specific building's service charge before you commit, assume management costs rather than hoping to avoid them, budget for vacancy, and model the Indian tax. Our Dubai project pages set out the prices those calculations start from. Market data moves quickly and sources disagree. Confirm the current position before relying on any figure here, and treat this as background rather than investment advice.