By Shane McGinley
Indebted developer said in April it had stopped selling real estate units in Dubai
Nakheel, the Dubai developer restructuring $10.8bn in debt, is
offering up to two months rent-free in units in lower-priced developments in a
bid to attract tenants.
The government-owned company is offering new tenants free
periods on leases in Discovery Gardens and International City, where rents
start from AED25,650 and AED17,100 a year.
A spokesperson for Nakheel said the offer had been
“well-received” but declined to specify how many apartments have been leased
under the scheme.
Nakheel was one of the biggest casualties of Dubai’s real
estate downturn, which saw prices halve from their 2008-peak and almost half of
projects in the emirate cancelled.
The developer's inability to meet its debt obligations in
the wake of the global credit crunch helped trigger Dubai's debt crisis in
The sprawling developments of Discovery Gardens and
International City have seen rents tumble as an imbalance between supply and
demand forced down values.
Latest data from Dubai’s real estate watchdog, RERA, showed
prices for a one-bed apartment in Discovery Gardens, which houses around 41,000
residents, had fallen nearly 30 percent from December 2009.
Rising vacancy levels will likely force more landlords to
offer incentives such as rent-free periods and reduces rates in a bid to lure
tenants in an oversupplied market, said James Gauduchon, head of marketing at
real estate agency Better Homes.
“There is no doubt that Dubai’s residential leasing market
is becoming more competitive,” he said. “Not only have prices dropped
drastically over the past two years, there’s the often-mentioned slight
oversupply in many areas, leaving landlords with under-occupied buildings.
“Until recently, Dubai-based landlords hadn’t warmed to
promotions, fearful of losing potential revenue,” he added. “However, if
landlords had addressed this earlier, it would have been easier to build up
occupancy levels in buildings in today’s market.”
Consultancy firm Asteco said last month that rents in Dubai
had begun to show signs of stability in the first quarter of 2011, with
apartment leases showing an average decline of two percent.
Nakheel, which overstretched itself building islands in the
shape of palms and other ambitious projects, said in April it was no longer
selling real estate units in Dubai.
Why don't they lower the rent by 8-16% in the first place? This would be a more realistic move.
Losing money for two months only better losing the whole year. It's a good move.
Do you know just allowing tenants to pay their rent monthly and landlords commission real estate agencies to collect the rent would change the face of the market here. That's what happens in every other mature market. A deposit and twelve monthly payments per annual lease is so much simpler than extended rental periods for the same price.
Sadly both starting rental rates at the developments quoted in this article are likely to come down still further, due to the poor rating on upkeep and maintenance, disclosure of threats to cut off district cooling and power through non-payment of bills etc that seems to consistently emanate from existing tenants.
Nakheel should compensate property owners in the form of free electricity water etc who invested so heavily to bring success to the projects of Nakheel The International City etc. The value of the property & rental has gone down over 50%.
Any one leasing in International City.. you should think twice even if given free!!!
speaking from experience!!
Can I get my two months free upfront first then pay rent on the third month? If there is a FREE rent period, I would like to exercise it first before paying a penny.
It is sad that the real estate companies fail to understand that the only way their properties can be sold is through easy financing schemes for ownership . They should take the money they are asking for rent as monthly installment for ownership . In case the person leaves and does not want to retain ownership paying the monthly amount they can sell it off to someone else. The properties get sold - the tenants get an asset and subsequently increases their commitment and also leads to steady sustainable growth of the UAE economy . Only other thing which will need to be changed is the investor status visa, which should have a nominal cost and long term validity .
What about people residing in The Gardens - for two consecutive years Nakheel has been raising the rents according to the RERA Index and no one could complain or do anything. The maintenance and upkeep has gone from bad to worse and Nakheel's mantra is completely opposite to that of Dubai's Go Green campaign - the once upon a time greenery has all but disappeared, half the buildings are empty (tenants have left), charges for even the most simple repairs/replacements are high. Please give us living in the Gardens some good news too.
Service charges for International City is kept at 7000. Service is worst. Tiles are broken. Streets light goes on & off frequently. Family security is a big concern with 90% bachelors. Security people are no more found around. Side roads are dirty & filled with cigrett buts. Access to Int'l City is a nightmare. If Nakheel wants to help the investors, please reduce service charges not rents which are already low.
There is only 1 way in & 1 way out for International city. Start for the office or go back home after office, its a terrible experience everyday for International City residents. You pay less rent but gaining illness due to the mental pressure because of traffic jams which is never going to be solved for Int'l city. I am a struggler since 3 years where I lost almost my saving on buying a flat in Int'l City.