Dubai: The UAE’s property market is moving quickly to end a decades-long practice of tenants issuing multiple cheques to their landlords for annual rental payments. According to market sources, all such transactions will be settled in the future through direct debits from tenants’ bank accounts.
As part of the process, Dubai Land Department confirmed an agreement with Emirates NBD earlier this week. In the coming weeks, the shift from cheques to direct debits will gain traction. The move should also be viewed in the context of the UAE decriminalizing most aspects of cheque bouncing. “The main benefit will be on-time rent payments without (landlords) having to deal with lost cheques or irregular signatures,” said Abdullah Al Ajaji, Managing Director of Driven Properties. “The disadvantages have yet to be determined; however, we believe that, in accordance with recent regulations, failing to make direct debit payments will not have the same impact as failing to make cheque payments.”
When exactly will this come into action?
The real estate and banking authorities have yet to specify a specific date when post-dated cheques will be phased out of the UAE property leasing market. Furthermore, landlords will need time to process what is required of them. Al Ajaji also stated, “Multiple landlords and developers may not be able to fully shift in a short period of time. And there could be many corporate tenants who will first have to account for this new service as part of their internal accounting policies. If the success rate is high, it will save developers and landlords’ time and effort, and then we will see a faster adoption.”
The pandemic brought in a major change
The pandemic has also contributed to landlords considering alternatives to collecting cheques. Some of the UAE’s largest developer-landlords allowed tenants to pay rent on a monthly basis, using their bank accounts or credit cards. Later, the UAE confirmed the decriminalization of bounced checks, which aided the process. Adham Younis, Group CEO AT D&B properties mentioned in one of his statements, “(Direct debits) is more of a common practice among individual landlords with units in freehold areas. I definitely think (other banks) will join the Dubai Land Department initiative. It gives an additional service to banks and creates a new level of trust between tenants, bank and landlord. The UAE definitely needs this to be in line with international best practices.”
Extra fee – Watch out!
For the time being, large developer-landlords charge an additional fee for tenants who want to pay by direct debit. Younis also added, “Sometimes, they might also require a backup post-dated cheque as a guarantee, I personally believe the UAE Central Bank always had plans to bring this initiative forward. Credit also to Dubai Land Department to drive this initiative with Emirates NBD.”
How will the Dubai Land department & Emirates NBD deal work?
- Rental cheque payments to soon turn automated and digitized by enabling rent collection via UAE Central Bank’s Direct Debit System i.e., UAEDDS.
- This will act as a huge advantage for landlords and firms in charge of property management by removing the administrative tasks associated with manually managing post-dated cheques.
- It will also provide a digital option to residents to make rental payments using their bank account also instead of cheque payments as per ongoing practices. This will allow them to benefit from flexible payment plans from their landlords or property management firms.
- Individual investors from other countries who want to buy property in Dubai can open non-resident savings accounts with Emirates NBD, which will help them with the purchase, management of the unit, and rent collection.