Increase in Dubai Rents Drives Tenants to Choose 12-Month Cheques or Direct Debits
Dubai’s housing sector is experiencing dramatic shifts as tenants are dealing with ever-increasing rents on yearly leases. A growing number of mid-market residential area residents are now seeking a paradigm shift in the traditional payment arrangement due to rising costs. Tenants have recently turned to monthly direct debits, attempting to find an approach to money management that suits them best. With all these questions arising, will landlords go along with such changes and what problems will they face together?
The Rise of Monthly Direct Debits
This has made tenants ask their landlords to allow them to pay their rentals through monthly direct debits after the recent RERA Rent Index revisions resulted into a higher rise in rents. This process involves withdrawing rent straight from the tenant’s bank account, which provides for more efficient way of fulfilling payment requirements. This move is mostly felt in mid-market residential areas where residents have been hit hardest by adjustments in rental rates.
Monthly Payments: A Solution for Budget Management
To lessen the burden on struggling tenants, rent payments can be deducted monthly thus obviating the need for sufficient funds during cheque submission time. Bounced cheques are becoming more frequent and this has negatively affected relationships between the tenant and landlord as well as credit scores being downgraded sometimes. In UAE bounced cheques do not attract criminal charges, therefore tenants are looking for secure alternatives.
Direct Debit System’s Perspective
The Direct Debit System CEO Ummair Butt says that 96% of the UAE population falls under a group whose salaries are paid on a month-to-month basis hence implying that direct debit should mimic payday cycle accurately. According to Butt allowing deductions every month causes reductions in bounced payments equaling 41%, which makes it possible to maintain life amid rising costs.
Landlords’ Reluctance and Current Adoption
Although some landlords are already offering 12-cheque options or monthly debits, however their numbers remain very limited. Physical cheques issued by tenants are trusted because of old fashioned mentality surrounding landowners. According to Usman Jameel, Sales Manager at Azco Group, millennials who are more comfortable with digital payments have adopted direct debits the most. Real estate experts argue that this change may take a while because landlords are used to having physical checks as method of payment.
Challenges & Factors Affecting Adoption
Landlords face several issues to implement a direct debit system even if it has numerous advantages. These include ‘assignment of receivables’ and the need for a ‘legal alternative’ to cheques. Due to multiple bank loans against various real estate assets, Landlords may find it difficult to divert their income through different banks.
Cost Implications for Landlords
Digital alternatives may be resisted by landlords who always look into costs in their business. Additionally acquiring charges on credit cards payments is 2% while direct debits on credit cards attract a fixed fee of Dh7. Even with processing fees being paid, traditional cheques remain safe instruments for the landlord.
The Bottom Line
Dubai’s real estate market is gaining traction in its adoption of monthly direct debits as tenants seek financial flexibility amidst soaring rents. Nevertheless, while obstacles and conventional thinking persist, the possible gains to be had by both tenants and landlords may set the stage for a gradual change in payment options. It will take a few years before we can see if monthly direct debit becomes one of the widespread features in Dubai’s rental market which is changing over time.
For those seeking rental solutions or landlords considering alternative payment methods and Azco Real Estate Brokers provides tailored services to meet your needs. Contact Azco today to explore how we can help navigate Dubai’s rental market and facilitate smoother transactions, including the adoption of monthly direct debits. Start your journey to financial convenience with Azco Real Estate Brokers.
