Landlords demand 15%-30% rent hikes, but can settle for 20% on one-cheque payment
Landlords in Dubai are using another strategy to demand higher rents – using cheques as a bait. Tenants, mostly those seeking renewals, are offered the chance to pay a lower rent provided they pay off the full amount in one cheque.
If they want to stick to multiple cheque payments – whether it’s four or six – then they will have to pay the higher asking rate, which could be anywhere from 5%-25% up on what the tenants had been paying so far.
Or else, they need to find alternate accommodations.
“Of concern has been the number of tenants who have taken on additional liabilities whether short-term loans or credit cards to use to pay rents – potentially at higher cost to the rental premiums being sought,” said Simon Townsend, CEO of Avison Young UAE.
What changed with new Dubai Rental Index
Three months into Dubai launching the digital Rental Index, landlords are feeling empowered to use cheques as a bargaining tool. This is mostly seen in recently completed buildings, those with a higher star rating systems based on build and maintenance quality.
“Landlords see their next lease renewals this year as key to ensuring they get the rental income they are looking for,” said an estate agent overseeing a sizable portfolio of rented apartments in Dubai Marina and the Downtown. “Because with the introduction of the new Rental Index, the Dubai leasing market is still trying to create a new base.
“It only needs two or three apartments in a multi-owner tower to rent out at a higher rate – say 10%-30% – compared to 2024 for other landlords there and in the that area to demand the same.
“Landlords in Dubai are getting the hang of using the star rating of a building to ask more.”
‘Single cheques payments are difficult’
Tenants confronted with single cheque demands for a lower rent to renew are caught in a bind. Agreeing to it will mean a sizable and immediate outgo from their budgets, and upending their spending plans.
Even new tenants looking to a new apartment are in no way better off. In more affordable residential areas of Dubai, rental growth may have slowed down or stabilized at current levels. But they are yet to see a major drop after 4 successive years of double-digit increases.
“I pay Dh74k on a two-bedroom, and the new lease renewal demands Dh95k,”said a tenant looking to negotiate a new lease. “I am not in a position to pay off Dh90k via a single-cheque, because that’s the ‘incentive’ my landlord is offering.”
According to Townsend, “The mechanism of paying rent in multiple payments whether that be cheque or direct debits has always (even in a declining rental market) been at a premium to the payment in a single transaction.”
“Many tenants, especially those who recently relocated, find paying this (rental) premium essential to be able to manage monthly budgets. Especially with many firms having ceased the provision of housing loans to their staff”
Source: gulfnews