With an aim to transform Dubai into a global digital hub, in July 2022 Dubai Land Department (DLD) joined hands with one of the top banks in UAE, Emirates NBD to automate the process of rental cheque payments and digitize the rent collection process using the Central Bank of the UAE’s Direct Debit System (UAEDDS). This year, Dubai Land Department has gone the extra mile to foster and expand digitization in the real estate sector with its new ‘Ejari update’ feature.
In January 2023, Dubai Land Department announced rent payments via. Direct debit through its innovative new Ejari update which features the Noqodi Ejari Direct Debit Service (DDS). The Direct Debit System (UAEDDS) by the Central Bank of the UAE (CBUAE) will facilitate tenants in paying their rent automatically, via direct debit.
DLD’s Noqodi Ejari
Dubai Land Department will now fully integrate the Ejari with the Noqodi Direct Debit system (UAEDDS). According to Noqodi Ejari DDS Manual released by the Dubai Land Department, the Direct Debit System (UAEDDS) by the Central Bank of the UAE (CBUAE) will provide the residents of Dubai with an automated payment method that will facilitate recurrent payments from their bank accounts.
The new system will allow tenants to manage the schedule of their rent payments during the renewal and contract creation process. The Noqodi Ejari DDS Manual will guide the users on the steps they need to follow to set up a DDS in Ejari and Noqodi.
The Need to Digitize Rent Collection Process
Historically, rent payments have been dominated by cheques for decades with many residential communities not offering the option for direct debit. This has resulted in payment delays for the landlords and management companies and has adversely impacted their abilities to conduct renovation or development work. But today, a vast majority of rent payments are done digitally. Thanks to the supportive policies introduced by the UAE Government to turn the nation into one of the world’s biggest cashless economies. According to the article titled – ‘Cashless Countries’ by the UK’s financial firm – Money.co.uk, the UAE is ranked at 8th Spot in the World in terms of a cashless economy with 83% of the population owning a debit card/bank account.
A vast list of measures and distinctive policies introduced by the Dubai Land Department in the last few years has accelerated the pace of digital payments. Today, every real estate stakeholder (i.e. Landlords, Tenants, Management companies, etc.) prefers to accept and receive rent payments digitally. Another factor which makes direct debit payments favourable for tenants is it is always easy to curate the payment terms agreed upon in the contract.
The Impact of Rent Payments by Direct Debit on Property Management firms
Dubai Land Department’s decision to encourage rent collection by direct debit has come as a blessing for property management firms. It is a win-win situation for tenants and property management firms as it will make the process faster and introduce operational efficiency to the process.
Here are the top 5 ways Rent Payments via. Direct debit Boosts the Revenues of the Property Management firms
1. Reduces Late Payments
Paying rent via. Direct debit minimizes the possibility of late payments. It ensures timely and uninterrupted cash flows for the property management firms which increases their abilities to spend on the development & welfare of the community as well as the residents. Under the Direct debit process, once the tenant authorizes the rent payment, Property management firms receive it without going through any hassles. This saves time & money spent by the PM firms in chasing the payments as well as from the stress of sending threatening eviction letters.
Landlords and property management firms collecting rents through post-dated cheques have to rely on traditional and manual payment processes which are very time-consuming and difficult to reconcile. It requires them to manage cheques from a large portfolio of communities and deposit them in a bank account. Furthermore, it also takes time for cheques to clear which delays the payments. PM firms also have to spend time tracking income payments on the CRM portal and maintaining the records and reconciling them which is both time-consuming and prone to manual errors. Rent collection by direct debit overcomes these hurdles by facilitating easy reconciliation digitally and tracking any missing rent payments.
2. Minimizes Administration Cost
Managing cheque payments involves huge administrative costs. Cheque payments require managing a lot of paperwork, reconciliation, hiring more administrative staff, dealing with the cheque bounces, and managing post-dated cheques which are both time-consuming and costly-affair for property management firms. On the contrary, direct debit payments automate the entire process of rent collection. Once the tenant sets a date, rental payments are taken automatically on the specified date each month. This prevents property management firms from investing huge money in collecting rents and maintaining tons of paperwork.
3. Overcomes Manual Errors
Cheque payments are also subjected to human errors. On several occasions, cheques used to make payments get bounced or dishonored by the banks due to human errors, such as – insufficient balance in the bank account, signature mismatch, discrepancy in dates, overwriting, or a cheque being damaged. This results in payments getting canceled and tenants incurring late payment charges despite making their payments on time. Delays in payments also adversely impact the operations of property management firms. Rent payments by direct debit overcome all these issues as bank payment portals inform tenants about insufficient balances or incorrect bank details in advance. This minimizes the possibility of bounced payments and reduces delays for homeowners in receiving timely payments.
4. Maximize the Occupancy Rate
With rising competition and several quality residential developments being added to the industry every month, flexibility is the only key to success for landlords. The more flexible landlords will be with rent and rent payments the wider the choice of tenants will be interested in renting their property. This creates an urge for the landlords to come up with more flexible payment options to attract tenants and one such option is – collecting the rent via. Direct debit.
Collecting rents via. Monthly direct debit from the tenants instead of a series of posted cheques will make the community more attractive for the tenants, especially for those who are finding it difficult to pay a large sum upfront for the initial rental cheque payment. It will also provide tenants with the flexibility to make rent payments from anywhere when they are outside the country and prevents them from any penalties related to late payments.
Rent payment by Direct debit also assists property management firms in the swift collection of rent and ensures timely payments and saves them from the hassles involved in cheque payments. Prioritizing the financial needs of the tenants will also allow landlords and management firms in building a customer-centric image and gaining a competitive edge in the industry through a positioning strategy.
5. Secure, Reliable, and Flexible
Rent payments by Direct debit are highly secured as they place on highly secured payment networks established by recognized banks. Rents are deducted as per the instructions specified in the rental agreement. Direct debit payments also offer flexibility to the tenants and allow them to set up their rent payments in line with their rental agreement. This has a profound impact on resident satisfaction and attracts new tenants to the community which results in better occupancy rates and more revenues for the property management firms. This additional revenue is further invested in the resident welfare programs which further improves their experience of living in the community. Thus, rent collection by Direct debit is a win-win situation for both residents and the management firms.