“We haven’t seen any rent-freeze discussions happening in residential,” said Prathyusha Gurappu, Head of Research and Advisory at Core, the property consultancy. “What’s being offered instead are rent-free periods and that too mostly on a few longer lease terms of two years and more.” (The rent-free periods are for an additional month or two in the contract.)
The previous months had witnessed some of the biggest movements ever in Dubai’s residential rental space, with tenants moving to new homes to make full use of fast-declining rentals. After the pandemic, the shifts were happening to bigger premises, and for those who could afford it, to townhouses and villas.
During this period, rents in a large portion of the popular areas are down to what they were in 2013-14. But a large number who have moved need to secure their present rentals; even the individuals who chose to remain on need their landlords to give them the comfort of an additional two- or three-year rent freeze.
History lessons
Since everybody recalls how rapidly rents had shot up in 2011-12 after the freefall of 2009-10 when the impact of the Global Financial Crisis was at its peak. Rents during those two years had acquired more than 15-20 percent, significantly more in specific regions, and which proceeded right until mid-2015.
This is why by asking for a rent-freeze clause, tenants are attempting to shield themselves from abrupt rental hike demands from landowners. Because for the first time in the last four years, there are indications of rents at the most in-demand locations either stabilizing or making a few gains.
But landowners on their part would prefer not to give any extra commitments if there’s anything they can do about it. A significant number of them consider it to be an opportunity to recapture the ground they lost in the recent past. At best, they are willing to give such a written guarantee to corporate tenants, who want their homes for senior staff or as staff accommodation.
But with individual tenants, the best landlords can do is rent-free, not rent freeze. “Currently, there is no provision on the specific number of years the parties are obligated to agree on for the freeze on rent,” said Esraa Rhibani, Litigation Associate at the law firm TLG. “However, if the parties decide on a rent freeze for a specified number of years, they must bind themselves by including such a clause in their tenancy contract.
“This will ensure that both the landlord and the tenant are bound by the law and cannot cancel the effect of such a clause unilaterally.”
The new law:
But landowners might not have this luxury much longer. Dubai is working on a draft rental law, which ensures a rent freeze on the initial three years of an agreement. In a rental market that could be heading up, that would be the best result for tenants and landlords alike.
“This will contribute greatly towards stability, as the tenant will be aware of the rental expenses that he/she would incur in the three-year period at the time of entering into the contract and arrange his/her affairs accordingly,” said Rhibani.