Tenants in Dubai will soon be able to pay their rent through their bank accounts and credit cards rather than using the traditional postdated cheque system under an agreement that aims to automate financial transactions in the emirate’s property market.
The agreement between the Dubai Land Department (DLD) and Emirates NBD will digitise rental cheque payments through the UAE Central Bank's Direct Debit System.
This will eliminate the need to manually manage postdated cheques submitted to landlords and property management companies, the DLD and Emirates NBD said on Monday without specifying when it will begin.
While some tenants in Dubai are already paying rent through direct debit, the collaboration with Emirates NBD, Dubai's biggest lender by assets, is part of the DLD's “mission to present a regulatory environment in service of tenants and property owners”, director general Sultan Butti bin Mejren said.
“The real estate industry in the UAE is one of the best and most competitive in the world … such collaborations will help facilitate and streamline the processes involved in the property market by employing progressive machinations on the path towards replacing the legacy systems in place,” he said.
Tenants in the UAE typically write out postdated cheques a year in advance. While this method gives landlords the security that the payment will be made, it can cause financial problems for tenants who sometimes have to take out a personal loan to pay their rent.
However, the agreement will give tenants access to flexible payment plans from their landlords or property management companies, the DLD and Emirates NBD said.
This is not the first time that tenants in Dubai have been able to pay their rent through direct debit or online banking.
In 2018, Dubai property services company Asteco introduced a new digital payment service for tenants that allowed them to pay rent via direct debit after teaming up with National Bank of Fujairah.
The new rental payment option for tenants in Dubai will boost confidence in the emirate's property sector, according to Lewis Allsopp, chief executive of Dubai-based broker Allsopp & Allsopp.
“Tenants will no longer have to provide forward-dated cheques in order to rent a property in Dubai,” Mr Allsopp said.
“This could mean that renting a property when expats first move to the emirate could happen faster as waiting for a chequebook is no longer required and could, in turn, lessen the length of stay in a short-term rental property.”
“This advancement in payment options for rental contracts in Dubai will add confidence in the market. It could also make the cost of living here more manageable by offering monthly payments rather than the upfront payments that we are used to. This will open tenants' options on rental properties significantly.”
The UAE property market has rebounded on the back of government initiatives such as residency permits for retirees and remote workers. Its expansion of the 10-year golden visa programme and the economic boost from Expo 2020 Dubai have also helped to increase prices and sales.
Dubai property prices and transaction volumes continued to rise in May, real estate agency CBRE said in its latest market report.
Average residential property prices increased by 10.9 per cent in the year to May 2022, with apartment prices rising 9.6 per cent and villa prices up 19.8 per cent,
Month on month, prices rose 0.4 per cent for apartments and 1.2 per cent for villas in May, the report said.
Meanwhile, the agreement will also allow international investors to open an Emirates NBD non-resident account that will help to streamline property purchases, real estate management and rent collection.
“Emirates NBD remains committed to supporting initiatives that will support the UAE’s long-term and strategic goals and strengthen Dubai’s standing as the investment destination of choice for international property investors,” said vice chairman and managing director Hesham Al Qassim.
The partnership between the DLD and Emirates NBD is in line with the Dubai government's goal to digitise services and promote a cashless economy.
In 2018, it unveiled the 10X initiative and Paperless Strategy to digitise services and eliminate the use of about 1 billion pieces of paper in transactions annually. Both programmes contribute to the emirate's sustainability goals.
The Covid-19 pandemic accelerated the digital payments trend in the Middle East, causing a permanent shift in consumer habits, according to a 2021 survey by global financial services company Visa.
In the UAE, non-cash payments are expected to account for 73 per cent of transaction volumes by 2023, up from 39 per cent in 2018, the Mena FinTech Association said in a June report.
