UAE leasing market is
anticipated to project robust growth in the forecast period on account of increasing
demand for car leasing, rising number of commercial activities, government initiatives,
etc. A lease is a contract
wherein the owner (lessor) of an asset (leased asset) grants the lessee access
to the asset for a consideration (rent). The consideration could either be
fixed or based on variables, for a time period (lease period), or could also
be fixed or flexible, with the understanding that, subject to the embedded
options of the lease the asset will either be returned to the lessor or
disposed of in accordance with the lessor's instructions at the end of such
period. Lease financing is gaining popularity in the country since it offers several
advantages such as lower monthly payments, tax benefits, fixed rate of
financing, etc. Also, less initial cash investment is required in leasing which
makes it more convenient for individuals.
However, in 2022, there
has been a rapid increase in rent by around 25% in the majority of
districts, making it unsustainable. This has been a huge impact on
affordability and has made it harder for tenants to renew their lease. This
factor could hamper the market growth.
On Demand Mobility Aiding the Market
Growth
Companies are focusing
on offering car leasing financial services where consumers can lease a
brand-new car for a year. They could also exchange those vehicles for a new one
each year. It is now simpler for customers to subscribe to vehicles
since companies have acknowledged the viability of having on-demand
services and have in many ways equated it to car ownership and its liabilities.
For instance, in 2022, Self-Drive, the smart mobility application, announced a
new “drive a new car every year” program under the name ‘Neos,’ which aims at
offering UAE customers flexibility and the option to drive a new car every
year. Local dealers will subsequently send the vehicle to their used car
division. To provide this program, the company has teamed up with automobile
manufacturers and car dealerships all around the nation. As all the services
are included in a single monthly charge, there are no down payments. These
financial leasing services claim to be a hassle-free alternative to car
ownership. Such factors are anticipated to further expand the market growth of
the leasing market in the forecast period.
Government Initiatives Boosting Market Growth
The UAE government has
been taking several initiatives to improve the leasing services, which is
further encouraging consumers to opt for such services. This is significantly
contributing to the overall growth of the market. For instance, in 2022, The
Dubai Land Department confirmed its agreement with Emirates NBD to start the
process of taking annual lease payments directly out of tenants' bank accounts.
Previously, big developer-landlords charged an extra cost to tenants
who requested direct debit. This change also offers support for the UAE's
proposal to decriminalize most components of a bounced check. This factor is
projected to fuel the market growth of leasing during the forecast period in UAE.
New Players Entering
Market Fueling the Market Growth
The UAE leasing market
has been observing an increase in the number of market players over the past couple
of years. For instance, in 2022, a new fintech startup was launched in UAE and
Saudi Arabia markets, named Five FS. The company aims
to offer customers free access to five financial services, including
loans, mortgages, deposits, insurance, and leasing. Hence, this factor is
anticipated to further boost the market growth during the forecast period.