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United Arab Emirates > Financial

United Arab Emirates

How To Budget For A Move To The UAE: An Expat Guide

Published Monday July 11, 2016 (11:16:11)

 

It is hard to talk about the United Arab Emirates without using superlatives. In less than four decades this Middle Eastern country has completely transformed itself from a tribal culture that was mainly dependent on fishing, pearl diving, and agriculture to a commercial, entrepreneurial, and industrial success story. The UAE has come a long way from the desert it once was, to the highly modern business hub with world-class infrastructure it is today.

It has become one of the most popular expat destinations for businesspeople, professionals, students, and retirees from around the world. Living in one of the Emirates, even for a short duration of time, is considered a unique and culturally-enhancing experience for adults and children of all nationalities.

The average pay in some of the Emirates is at par with (if not higher than) many European and Asian countries. Moreover, since it is an Islamic nation, the residents of the UAE do not pay taxes on their income or most of the items that they purchase (though there is a Municipality Tax on property). The total disposable income is therefore higher in this nation, which is one of its main attractions. Though the overall cost of living has skyrocketed in the last few years, it is still slightly lower than New York, London, Singapore, Switzerland, and Japan.

Nonetheless, many expatriates notice that they don’t really save much even after spending several months in the UAE. In fact, many of them have to dip into their savings even before landing in the UAE just to make the move.

Relocating, as we all know, can be quite an expensive affair, especially when the whole family is involved. In such cases, most of us consider the travel, accommodation, and food costs. However, there are several more expenses that need to be factored in when planning a budget to move. If you are moving to the Emirates for professional purposes, you may want to ask your employers for a relocation allowance. Read on to learn more about the various expenses you should keep in mind when drawing out your budget.

Shipping belongings

Shipping is probably one of the first expenses you may incur when you move. The amount you spend will depend completely on the country you are traveling from and what you decide to take with you.

Most people prefer to carry personal items such as clothes, accessories, jewelry, books, documents, DVDs, medication, toiletries, cosmetics, and laptops with them on flight. The bigger and bulkier items like your furniture, electronics, household appliances, crockery, utensils, and art collection can be sent over by sea separately. Some companies include the packing charges in their quotation, which means that you have to pack nothing on your own. Of course, all the items have to be insured, which increases the cost to a great extent.

People pay anywhere between AED 10,000 and AED 25,000 to get their belongings shipped. Some employers in the UAE offer to pay this. Others believe it is best to avoid this expense completely and give their expat employees an additional amount to set up their house instead.

Visas and work permits

Unless you are a GCC national, you will require an employment visa if you’d like to take up a job in the UAE. Just the visa application fee per person is AED 300 and the deposit is around AED 5,000. The actual cost of the visa is surprisingly low, at less than AED 200 per year. If you want to speed up the process it will cost you AED 100 extra.

However, it is essential for all applicants to undergo certain medical tests which could cost AED 200 to AED 300 in total. In all probability, your employer will be obligated to pay for your residence visa and work permit expenses.

Accommodation

Dubai alone has more than 235,000 housing units, and more than 70% of the local population rent their homes. Because of the high demand for accommodation, landlords get away with charging exorbitant amounts for their properties. You can end up paying anywhere between AED 2,000 (for a small, studio apartment) and AED 25,000 (for a huge villa), depending on the location you choose.

Don’t forget to keep at least 5% of the rental value of the property aside to pay the real estate agent’s fee. Another 5% of the annual rent will have to be paid as deposit on unfurnished accommodation. If the place you are renting is furnished, the deposit is likely to go up to 10%.

Telephone, internet and television

Telecommunication and cable services across the UAE are usually provided by one of the two main operators, Etisalat and the Emirates Integrated Telecommunications Company (also known as Du). There is no charge for making calls from one landline to another. Mobile bills in Dubai are also relatively low as compared to Western countries. What you do need to consider when you first move to the Emirates is the installation charge.

The installation fee charged by Etisalat is around AED 180. This is a one-time, non-refundable charge. You can choose a package for all three services, ranging between AED 259 and AED 539 per month.

Charges levied by Du are much higher. There is an initial payment of AED 200 as well as an advance payment or adjustable deposit of AED 200. For every decoder you require, there is a deposit of AED 150. You can choose a package for all three services, ranging between AED 199 and AED 509 each month.

Utilities

Water supply, sewerage, electricity, and housing fees are the basic monthly expenses to consider when planning your budget. On average, a family of four pays around AED 1,200 per month towards these utilities. This amount may change drastically, depending upon the size of your house and your lifestyle. However, don’t forget to put a fair amount aside for the deposits and connection fees to set up these utilities.

DEWA provides the main utilities to the residents of Dubai. When applying for a new connection, you will be asked to pay a deposit ranging between AED 2,000 (for an apartment) and AED 5,000 (for a villa). This amount is refunded to you when you leave.

In addition to the deposit, you also have to be a non-refundable, one-time connection fee ranging between AED 110 (for an apartment or small villa) to AED 210 (for a bigger villa).

Education

The education system in the UAE is among the best in the world, with over 500 international schools across the country. Almost every Emirate has a wide variety of private schools, offering its students a choice of 13 international curricula. Some of the top institutes differentiate themselves from the others by getting accredited by at least one globally-recognized body.

Moreover, a number of English medium institutes have a staff base that consists of well qualified and experienced expatriate teachers. The style of education in many has moved away from being trainer-led; a vast majority of the institutes have been adopting engaging methods such as interactive whiteboards, wireless internet, and experiential learning. The top schools in the UAE also boast of numerous facilities like swimming pools, science labs, technology labs, art studios, drama studios, and auditoriums, to name a few.

However, such good quality education comes at a high price. Moreover, public schooling isn’t available to expats. Some of the international schools in Dubai are actually a lot more expensive than well-reputed British academies.

Depending upon the age (grade) of your child and the school you choose, you could pay anywhere between AED 8,000 and AED 99,000 per annum. This only includes the yearly tuition fees. You will probably end up paying a few extra thousands every year on books, uniforms, field trips, bus fees, and stationery. A majority of the private schools also charge an application fee and admission fee for new students or even returning students.

Expat families settled in the UAE spend a significant amount of their incomes on their children’s education. It is therefore best for you to take up a job where the employer offers to pay the school fees. Since the initial cost of joining a school could run into thousands of Dirhams per child, make sure that you consider that in your budget too.

Domestic help

Even the middle-class residents of the UAE are known to lead a fairly comfortable lifestyle compared to other places. One such luxury attached to life in this country is being able to afford full-time domestic help. While this may be the norm for some Asians, it is a new experience for many Americans, Canadians, Australians, and Europeans.

The UAE has become a hotspot for housekeepers, nannies, babysitters, cooks, and drivers from countries like the Philippines, India, Sri Lanka, Bangladesh, Ethiopia, and Indonesia. Of course, there are numerous legal implications and costs that come with hiring of foreign domestic help in any of the Emirates. Do bear in mind that engaging part-time help without the proper paperwork is neither safe nor legally permitted.

First of all, the starting salary of a live-in domestic helper could range anywhere between AED 2,000 and AED 4,000, depending upon their responsibilities and experience. This is the basic salary, and as an employer, you will be expected to include other allowances such as boarding, lodging, medical expenses, toiletries, phone calls, clothing, and so on. People from certain countries will expect an annual bonus, which is equivalent to a month’s pay.

The cost of sponsoring a housemaid from another country could easily come up to AED 10,000. Depending on that person’s nationality you could also be asked to pay a deposit ranging from AED 3,500 to AED 9,500. If an agency is involved in the recruitment process, don’t forget to factor in their fees too. Engaging a local for basic housework turns out much cheaper.

If you are not happy and decide to terminate their services, you are obligated to pay for their visa cancellation and airfare back home.

In certain cases, companies also offer to pay for their expat employees’ domestic help.

Inflation

While this isn’t exactly an expense, it is an important aspect to consider when you plan your finances. According to a report published by Gulf News, Dubai’s inflation rate has been expected to be anywhere between 15% and 22%. The International Monetary Fund (IMF) has flagged off the country’s inflation rate as one of its biggest potential challenges at 8%. Your salary is not likely to increase at the same rate (unless you get a promotion or change jobs).

One of the main factors contributing to high inflation rates is the rise in property rentals. It is therefore best for you to negotiate a package wherein your employer pays your monthly rent, even if it means that you take home a bit less in comparison. This way, you won’t have to worry about the dramatic spike in renting expenses every year.

Summary

These are just some of the basic expenses that most expats incur when they first move to the Emirates. It doesn’t take into account the amount you spend if you decide to obtain a driving license or purchase a house or vehicle.

In a country like the UAE, where even luxuries soon seem like necessities, it is easy for outsiders to fall in a trap. With a higher disposable income, you may actually find yourself spending a significant amount of money each month on expenses that you wouldn’t normally have back home; for example, an all-inclusive cable package, a club membership, or a full-time housekeeper/driver.

While there is nothing wrong in splurging, it is essential to consider these possible expenses beforehand while planning your finances in order to avoid any disappointments later on.

Sources: [1], [2], [3]


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