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How rental charges in Dubai depend on the existence of reserve funds?

Published on January 14, 2017 by Dubai Apartment

Some owners of accommodation in Dubai add the reserve fund fee to the rental price. Such fee increases the rental price of accommodation. But let’s try to discover why rental charges in Dubai depend on reserve funds and what the key benefits for owners are.

What is a reserve fund?

Each residential building in Dubai has to have main and reserve funds. The main fund is used to cover current expenses and maintenance works. The reserve fund is used to cover capital contributions and replacement of the commonly used infrastructure: equipment, facades, air conditioning systems, elevators etc.

The reserve fund fee amount is thoroughly calculated. One has to prepare the annual budget and a 10-year maintenance plan. Such calculations have to be based on researches of a third party company and include expenses for replacement or restoration of various standard elements of the building.

rental charges in Dubai

Reserve funds and rental charges in Dubai

In general, independent studies can be used to make a forecast of expenses for the next 60 years, which are divided into 10 or 20 years fees. Such forecasts are updated every three years in accordance with current maintenance practice, inflation and other expenses.

In other words, when rental charges in Dubai include reserve fund fee that means the residential building will be well-maintained for a long period of time.

Buildings without reserve funds

Unfortunately, only 20-25% of residential complexes are using reserve funds. It turns out that other 75% has no major repair plans for the nearest 5-10 years. The majority of such complexes was built during the building boom era before the crisis. One can find the lowest rental charges in Dubai in such buildings.

Key factors that affect rental charges in Dubai: main benefits of residential complexes with main and reserve funds for tenants.

Real Estate Regulatory Agency of Dubai makes everything to create reserve funds in each and every residential complex. They recommend paying 9-10% of the overall maintenance price to such funds in order to prevent the budget shortfall.

Owners of the residential complexes without reserve funds, who have already faced budget shortfall, are repairing their buildings and sending incredible invoices to tenants. That’s why you have to select a residential complex with a reserve fund if you plant to stay there for a long time. You will pay a little bit more every month, but you will be totally protected from such “surprise” as an out-of-plan invoice.

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