Dubai rents: Single or 12-cheque payment? How to save big during price negotiations

An increase in rental rates annually is putting additional financial strain on tenants struggling with stagnant salaries

by

Waheed Abbas

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Published: Sun 14 Jan 2024, 5:15 PM

Last updated: Sun 14 Jan 2024, 10:55 PM

Landlords are capitalising on the growing trend of tenants opting for multiple cheque payments and negotiating higher rents. Many tenants also push for 12-cheque payments, even if it means losing a couple of thousand dirhams.

This annual increase in rental rates is putting additional financial strain on tenants struggling with stagnant salaries. Experts have said that brokers also seek higher commissions because the market is robust.

The upward trajectory in rental prices will continue to impact tenants in 2024. If tenants pay upfront in a single cheque, they can save big on their rentals. Industry executives have said that landlords are in a position to demand higher rentals as the number of cheques goes up.

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However, tenants can make the best of what they have been given by pushing for value add-ons during negotiations. According to experts, these include robust maintenance contracts or AC servicing. These tend to be paid for by the landlord across a longer period and are easier to negotiate for, Ainsley Duncombe, founder of Off-Market Listing (OML) Dubai, said.

Alex Pigaev
Alex Pigaev

Alex Pigaev, chief business development officer at Realiste, said landlords negotiating a higher rent increase with 12 cheque payments is becoming more common; however, people cannot increase their income as fast as rentals are growing. "Consequently, we observe that areas located farther away are experiencing a growth in the number of rental requests."

Duncombe said an increasing number of landlords are asking for higher rents in compensation for more cheques.

Despite Dubai's population being more liquid and having more disposable funds on average than the rest of the world, he added that multiple cheques for rental contracts are increasingly becoming the norm because large corporate employers, offering to pay rent in one cheque, have become few and far between.

Ainsley Duncombe
Ainsley Duncombe

"It's fair to say that one-cheque payments are more of a legacy from a bygone era. The unfortunate reality for tenants is that with an undersupply of listed property and rising rental values, negotiating lower rents is very difficult, and in many cases, simply not realistic," said Ainsley Duncombe of Off-Market Listing.

Rents to continue rising

Market players expect rents will continue to rise at a double-digit rate in 2024 due to high demand, driven by the city's growing appeal as a haven for the wealthy and the influx of professionals, among other factors. Following a 23 per cent rise in the first half of 2023, rents are expected to go up by another 20 per cent this year.

Pigaev said rental rates have increased in some areas by up to 30 per cent in 2023 as compared to 2022.

"Due to the high rates, tenants are trying to wait for the low season, renting holiday homes, making it challenging and expensive to find apartments. The high demand has caused brokers to ask for higher commissions because the market is robust. Customers are rarely asking for a single cheque, as not everyone is ready to pay the entire amount upfront," he said.

Some financial institutions also take advantage of this to offer rent packages where tenants pay monthly and the landlord receives larger, less frequent instalments.

Tenants becoming aware of Rera rules

Khaleej Times earlier reported on how tenants are increasingly opting for multiple-year tenancy contracts, expecting rents to stay higher in the coming years and giving them peace of mind for the next couple of years.

Dubai's Real Estate Regulatory Authority (Rera) has clear rules and guidelines that govern fairness and transparency, especially regarding annual rent increases. "We are seeing more and more tenants educating themselves about their rights and challenging landlords when there is a deviation from the legally allowed rent increase," added Duncombe.

Demanding tenants

As rents are rising, tenants are far less likely to move homes unnecessarily amidst increasing rents. However, they have become more demanding, asking for more property alterations.

"If you speak to expats who have been in the city long, many will recall moving almost every year. Nowadays, if the property still functions and family has not outgrown the number of bedrooms, tenants will choose to stay put rather than leave themselves exposed to higher rents," he said.

"Interestingly, as tenants stay in properties longer, it is becoming more common for them to request alterations to properties and upgrade rental properties in a way that was not done before. One of the most popular requests is wanting to wrap kitchens and bathrooms since they intend to stay in the property for a longer period."

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