Banking Solutions for Rising UAE Rents
In the UAE, monthly rents constitute a significant portion of residents' expenses, often representing a substantial portion of their budgets. Over the past few years, the nation has witnessed a steady increase in rental prices, driven primarily by the influx of foreign workers and the robust expansion of the economy.
According to real estate consultancy CBRE, the final quarter of 2023 saw a 2.0 per cent year-on-year increase in average apartment rents in Abu Dhabi, accompanied by a 0.8 per cent rise in villa rents. Similarly, Dubai and the Northern Emirates experienced a continuation of this upward trend in 2023.
Looking ahead to 2024, rental prices are expected to persist in their upward trajectory, albeit at a slightly slower pace. This projection poses a challenge for residents seeking affordable accommodation in an increasingly competitive market.
To address the rising financial burden of rent, several local banks have introduced innovative solutions aimed at easing the strain on tenants. Among these offerings is the option for tenants to pay their rent in advance, providing them with greater financial flexibility and stability.
Dubai Islamic Bank, the largest Shariah-compliant lender in the UAE, facilitates the 'rent in advance' facility through Al Islamic Finance, offering residents the opportunity to streamline their rental payments.
HSBC Bank extends a similar service to its customers through a 'Rent Loan' program, featuring an annual percentage rate starting from 7.24 per cent. Premier customers employed by an HSBC-listed company and who transfer their salaries to HSBC are eligible for this service. The loan's interest rate remains fixed throughout the tenor, with interest calculated on a daily basis and applied to the reducing loan balance each month.
Ajman Bank offers rent payment solutions under its Shariah-compliant personal finance scheme, 'Service Ijarah'. This arrangement allows the bank to purchase the requested service on behalf of the customer, granting them the right to use it for a predetermined period in exchange for an agreed-upon rent.
First Abu Dhabi Bank provides tenants with the convenience of managing rent payments through its credit card facility. With interest-free payment options and flexible terms, this service offers tenants greater control over their financial obligations related to rent and property fees.
Al Hilal Bank introduces the 'Rent Finance' scheme to assist tenants facing financial difficulties in meeting their rental obligations. With a repayment tenure of up to one year and competitive rates, this initiative provides tenants with the necessary support during challenging times. To qualify, applicants must meet certain criteria, including a minimum salary requirement, valid identification documents, and additional documentation as deemed necessary.
In conclusion, as rental prices continue to rise in the UAE, tenants are faced with the challenge of managing their housing expenses amidst other financial obligations. The introduction of 'rent in advance' facilities by local banks offers tenants a practical solution to address this challenge, providing them with greater financial flexibility and peace of mind. By leveraging these innovative banking solutions, residents can navigate the evolving rental landscape with confidence and stability.
By: Sahiba Suri
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