Dubai's upscale locations have already seen their share of double-digit rent increases in each of the last 3 years. Now, a lot of those kind of hikes are happening in mid-market areas. More so when it comes to rent renewals. Image Credit: Shutterstock

Dubai: Mid-market residential locations such as Jumeirah Village Circle, Al Furjan, Arjan, Motor City and even Dubai Sports City are seeing more of the full 20 per cent rental hikes allowed on lease renewals under the revised RERA Rental Index.

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While many residents there were expecting hikes, their expectation was that it would be limited to 8-12 per cent increases. For many, being confronted with a 20 per cent ‘take it or leave it’ demand from their landlords has come as a crushing disappointment.

The new RERA Rental Index went into effect April 1, and offers landlords more leeway in raising their asking rates to be in line with the average for that area or community. But they must ensure the new rate does not breach the 20 per cent upper limit when it comes to the increase.

Market sources say there are multiple factors why Dubai’s mid-market residential areas are seeing the full weight of the new RERA rental rates.

  • The biggest rental hikes are aimed at tenants who moved into locations such as JVC or Al Furjan between 2018-2021, which was when the rents were at some of the softest levels in Dubai. It was more so in the city’s newer or emerging residential locations, with some leases even going for well below the market rates at the time.
  • Since 2021, these areas have seen a steady stream of more new homes and buildings getting complete and entering the rental market. These units carry a much higher rent.
  • What’s happening now is that the tenants who moved in between 2018-21 are now being asked to pay the full market rates, with immediate effect. After summer, this trend will pick up further as more contract renewals come through.

“The peak 20 per cent rent increases are no surprise because the mid-market areas are what’s seen the lowest rise in new home supplies between 2019-23,” said Eloisa Murando, Analyst at GCP Properties. “But now, with increased supply, rents in Dubai’s affordable areas are outstripping the city-wide rental increase.”

At JVC, new one-bedroom apartments are listing at upwards Dh60,000 on average, with those at in-demand buildings at around Dh75,000.

As for Arjan, listings for one-bedroom apartments still show a wide band, from around Dh60,000 to as high as Dh80,000.

Al Furjan, which is now one of the busiest residential areas when it comes to mid- to upper-mid property sales and rents in Dubai, too has a wide range of rental options. Based on a sample of listings, a new lease could be had for Dh55,000 or as much as Dh90,000 for a one-bedroom unit.

“What’s showing up as asking rents in new listings will also reflect on renewals,” said an estate agent.

How long - and far - will these rent hikes go?

The new RERA Rental Index came into effect April, and it would take a full 12-13 months of renewals before things start settling down. Also, each of these mid-market locations in Dubai will be seeing additional new homes come on-line, of which significant numbers will be rented out. That too should stabilise or slow down rental increases.