Dubai: Expect Higher Commission Fees if Renting for Less Than Dh100,000

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In Dubai, tenants renting properties under Dh100,000 annually are facing higher brokerage commissions as demand for affordable rentals surges. Traditionally, brokers charge 5% of the annual rent as a commission, excluding 5% VAT. However, for properties priced below Dh100,000, a new minimum commission fee of Dh5,000 is being implemented, leading to higher effective rates for tenants in this segment.

For example, a tenant renting an apartment for Dh70,000 would usually pay Dh3,500 in commission but now pays Dh5,000, raising the effective commission to 7.14%.

In contrast, luxury market tenants continue to pay the standard 5% commission, which has less impact due to higher rental amounts. Rising rental prices in Dubai, driven by increased demand and economic growth, are amplifying overall housing expenses for tenants. Between June 2023 and June 2024, residential rents rose by 21.1%, with apartment rents up 22.2% and villa rents up 12.7%, according to CBRE.

Despite the rising rental market, there is no legal cap on commission fees, which are agreed upon between tenants and brokers before finalizing contracts. Some brokers argue that the higher commissions reflect rising operational costs. An emerging trend sees landlords, especially in luxury developments, covering the commission fees to attract quality tenants, aligning with global norms where landlords bear more of the pre-contract workload such as marketing and viewings. This trend is gaining traction in competitive, high-end areas of Dubai.

Source:https://www.khaleejtimes.com/business/realty/dubai-tenants-face-increased-broker-commissions-in-affordable-properties