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.
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