Surprisingly, the most popular method of renting property in Dubai at the moment is off-plan leasing. How does this process work?
The property developer opens sales of the property at the construction stage, providing detailed deadlines, plans, and stages of upcoming work. Then the search for potential owners begins. Developers offer flexible payment options during the construction period, attracting buyers. For example, there is a 50/50 option, where half of the amount is paid during construction, and the other half is paid monthly after completion of construction within a predetermined period. The advantage is that the buyer receives the property before full payment is made. In such conditions, owners often begin to rent out real estate, making a profit and quickly recouping their investment.
The “classic” method, widely known in the real estate world, is also possible. The owner purchases the property for the full price and begins renting it out. This time-tested method has a long payback period.
Let’s answer another frequently asked question. According to the current legislation of the Emirates, property owners are NOT prohibited from renting out their property for a period of 1 year or more. Short-term rentals require a special license that allows you to rent out the property on a daily or monthly basis. You can obtain a license yourself or use the help of a licensing company. The transfer of property management to professionals is documented, allowing the owner to receive interest from its income.
The percentage of return depends on several key criteria:
● Profitability of the object. This parameter affects the liquidity of the object, its location, surrounding infrastructure, and traffic.
● Maintenance and utility costs. This includes costs for cosmetic repairs and maintenance of the property.
● Object category. The percentage of return also depends on the class of real estate. For example, premium real estate brings in less profit compared to budget apartments available to a wide range of people. This is also worth considering when choosing rental properties in Dubai.
The average income from residential real estate in the Emirates is between 5% and 10% per year, while commercial real estate brings in a little more – up to 15%.
Legalization and registration of real estate lease agreements in Dubai is a specific process. Initially, the contract specifies the cost of the apartments, which the owner does not have the right to increase during the first two years after signing. Thereafter, the price change must comply with the norms set by the Dubai Real Estate Regulatory Agency. This agency determines the average cost of renting real estate, focusing on the level of profitability. Any excessive increase in prices set by the agency is considered unacceptable and is subject to constant monitoring.
Registration of rental agreements is carried out in accordance with local regulations and laws under the supervision of the Emirates Real Estate Regulatory Agency. It is possible to register online through the special system “Ejari.” Although registration is not mandatory, it does provide legal recourse if any problems arise. Ignoring the registration procedure deprives property owners of government protection, which may be necessary in certain situations.
Each registered agreement receives a unique barcode that remains valid for the entire duration of the agreement. Registration does not require additional financial investments. State control in the field of real estate is also supported by the absence of taxes on property and income throughout the Emirates.
The algorithm for renting out real estate in Dubai follows a certain structure. First, the property owner, independently or with the help of an agency, begins searching for tenants. The next stage is the drawing up and signing of an agreement, which is approved by both parties.
The contract must clearly define:
● Fixed cost of renting apartments.
● Terms of payment of rent.
● Property rental period.
● Conditions for contract renewal.
● Additional costs associated with property maintenance.
● Duties and responsibilities of both parties.
Signing the agreement is usually accompanied by payment of the annual rental cost in accordance with the terms of the agreement. In addition, the tenant is required to pay a deposit of 5% of the annual cost.
Rental payments for properties in Dubai, as mentioned earlier, are usually paid in advance for the entire year. This unofficial rule is established in Dubai and throughout the Emirates. Payment is made using bank checks, the number of which is determined by the terms of the agreement. Checks can be issued quarterly or monthly separately. When the rent is written off, the owner contacts the bank. A dishonored check may result in criminal liability for the owner.