Industry experts say landlords will try to reduce the number of cheques accepted from tenants as real estate markets start to recover.
[This article was originally published at Arabian Business]
Landlords that own properties in the UAE will try to reduce the number of cheques accepted from tenants, as real estate markets start to recover this year.
Renters in the UAE have recently benefited from falling rents and a growing willingness by landlords to accept multiple cheques, but an expected real estate recovery could spur property owners to demand fewer installments from tenants, Propertyfinder Group said in a statement.
A research among the nearly 24,500 Dubai apartments and villas advertised for rent on propertyfinder shows that just about one in six specify the number of cheques required. Out of those that do, 1,842 listings state that tenants can pay in four cheques. A further 925 mention one cheque, 1,052 refer to two cheques and only 140 will permit 12.
About a decade ago, putting down an entire year’s rent upfront was the norm and those tenants whose employers did not offer such advances were often forced to borrow from the bank. However, greater competition among landlords helped ease the burden on tenants forming a new norm of two-three cheques, with four cheques also being common.
“The current market has seen some power returning to tenants – they can start to dictate more favourable terms and the amount of cheques is often one of those negotiation points,” said Lukman Hajje, the chief commercial officer of the Propertyfinder Group.
Few tenants ask to pay in more than four cheques and it is rare for a landlord to accept a request for six cheques, added Mark Towers, managing director of Edwards and Towers, one of propertyfinder’s top brokerages.
“We believe we are some way off a market where 12 cheques or payments are the norm and as the market improves landlords will try to reduce the amount of cheques again,” said Towers.
The comments come as real estate consultants JLL believe Dubai apartment and villa prices are close to the bottom of their current cycle, after declining 6 percent and 8 percent respectively in 2016, and forecast the next price movement will likely be upwards.
“As the labour force evolved and HR departments have started to lump housing benefit into salaries we have seen more of a need for landlords to accept more cheques,” said Towers.
“Ten years ago, employees would get a single rent payment from the employer but now it is added onto the salary and paid monthly. This puts a strain on tenants’ finances and they have no choice but to search for landlords who will accept multiple cheques.” He added: “Properties that let on a single cheque two years ago are now let on a four-cheque basis.”
In developed markets worldwide, the norm is for tenants to pay rent monthly, preferably through a direct debit from their bank account, but landlords in the UAE have shown little willingness to adopt this method.
“We don’t believe more legislation is required to move towards a monthly payment structure,” added Towers. “It is more a matter of time for landlords to become accustomed to a new reality – a combination of economic factors has occurred over the past two-three years where companies are paying their employees differently and the new workforce is putting pressure on the landlords to adjust.”