Investors will rethink before committing to property

But market momentum is such that the rental dispute board will be taken in its stride

Dubai: Dubai’s tenants now have the platform to be heard. The imminent creation of a new rent arbitration centre — Rent Dispute Settlement Centre which will fall under the Dubai Land Department and replace an earlier entity — to settle disputes in 30-45 days ensures that the playing field is balanced between landlords and tenants.

But will this, by extension, also impact developer interests? “If investors are buying property with the intention of leasing out, and they see a market situation where rent disputes go in favour of tenants, they might put a pause on their investment decisions,” said Parvez Khan, CEO of Pacific Township Holdings, a developer with a current portfolio of three residential projects including one at the Downtown.

“Rental yields will always have a major say in influencing buyer decisions. But the current sales momentum in the marketplace should be able to take the rental agency creation in its stride. ”

The new entity will not handle tenancy disputes on lease-to-buy agreements — many developers are using this incentive to get people buying into their projects — or the long-term leases.

Clear understanding

“Given that rentals have gone up drastically in the last 12-18 months there is definitely an increasing chance of disputes,” said Niraj Masand, director at the property services firm Banke.

“Furthermore, with capital values also going up, sellers looking to exit are often not in a position to do so as many buyers are end-users and hence a tenanted apartment or villa doesn’t suit their requirements.”

Developer sources believe the proposed rent dispute agency could skew in favour of tenants. A way out would be for future landlords to precisely state what rental hikes could be in the tenancy contract and the period when it would come into effect.

“This way tenants have a clear understanding of what they are getting into and chances of a dispute arising are reduced,” said Khan. “On the landlords’ part they could offer incentives such as a longer rent-free period or offer a one- to three-year moratorium on rent increases. It is how tenancy contracts are structured in many mature markets and could easily be implemented here.”

Apartment gains

All of the key property fundamentals have been headed upwards in Dubai in recent quarters. Cluttons, the property services firm, reckons average residential values across Dubai as being up 30.6 per cent — led by apartment gains with 34 per cent — in the first six months. Rentals too have been tracking upwards, and market feedback suggests there have been some sharp rise in the asking rates since late August.

And it is not confined to the residential sector alone. Commercial rents too have been treading up, but within certain locations and on select properties. The steady supply of new commercial stock has meant rentals have been range bound.

“The biggest plus from the Rent Dispute agency is the fast-tracking of settlements; where it used to be three months or more on average, we are talking about 30 days and that’s a major advantage for all parties involved,” said Masand.

“It means that tenants who feel they have been hit with sudden hikes are likely to take their chances at the dispute centre. More so, since the new decree makes it clear that any ruling below Dh100,000 on rental claims is binding on both parties.”

Some in the market believe that the new entity could also arbitrate on office rental disagreements. “It could be why that the no-appeals threshold on claims is set at Dh100,000 — it is unlikely that there will be such claims in the residential sector, even within villas,” said an industry source.

Source: gulfnews

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