What to take into your next appraisal
- Use occupied unit-months to model lease-up.
- Distinguish tenant deposits, contracted rent and cash collections.
- Define stabilisation before applying an exit yield or refinance assumption.
Match rent evidence to the proposed building
DLD’s rental-data fields distinguish registration, start and end dates and include contract amount, annual amount, property characteristics and new or renewed status. Those distinctions matter when comparing an initial letting programme with an established rent roll.
Screen comparable homes by location, unit type, specification and lease terms. Keep service inclusions, furnishing, incentives and payment schedules visible. A listing rent is an offer, while a recorded contract reflects a different evidence category.
Forecast unit occupancy and cash separately
Begin with completed lettable units, add move-ins and subtract move-outs to calculate occupied units each month. Apply each lease’s start date, rent and incentive. Forecast collections from the agreed payment schedule rather than assuming accounting rent equals cash every month.
Treat refundable tenant deposits as liabilities. Include leasing, management, repairs, common utilities, insurance and owner-borne charges. Define how service-charge recoveries work for the actual leases, and avoid deducting an expense while also assuming an unsupported full recovery.
Worked example: first-quarter lease-up
Assume 100 completed apartments, rent of AED 8,000 per occupied unit-month and average occupied units of 20, 40 and 60 over the first three months. There are no incentives, arrears or partial-month adjustments. Operating costs are a fixed AED 80,000 per month plus 10% of rent.
Quarterly rent is AED 960,000. Operating costs are AED 336,000 and the defined operating surplus is AED 624,000 before capital expenditure, debt and tax. Using the month-three occupancy for all three months would overstate rent by AED 480,000.
| Month | Average occupied units | Rent | Operating surplus |
|---|---|---|---|
| 1 | 20 | AED 160,000 | AED 64,000 |
| 2 | 40 | AED 320,000 | AED 208,000 |
| 3 | 60 | AED 480,000 | AED 352,000 |
Define the stabilised year
At an assumed 95% average occupancy, annual rent is AED 9.12m. The same cost rule gives AED 1.872m operating costs and AED 7.248m operating surplus. This is a model definition, not a market-stabilised occupancy claim. Confirm which costs a valuer or lender includes in NOI.
At a hypothetical 6.5% capitalisation rate, that surplus implies about AED 111.51m before disposal costs. A valuation based on unsupported occupancy, an incomplete expense budget or a mismatched income definition is not improved by a precise yield.
Fund the transition
Add the construction completion balance, leasing spend, furnishing where applicable and operating deficits before stabilisation. Size any investment debt from supported income and the lender’s terms. Reconcile proceeds to construction debt, fees and reserves before treating refinancing as cash available to equity.
Compare the hold case with a sale case using the same land and construction costs. Keep future capital replacements and the ultimate disposal date explicit so that a long hold is not represented by one early valuation.
Sources and further reading
- Real Estate Data Dubai Land Department
- Discounted cash flow valuations RICS
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