With the variety and extravagance in accommodations that Dubai has to offer, it is very easy to get carried away. Figuring out how much you should be paying towards housing rent is part mathematical problem, part sound judgement.

The house that you pick must be in line with your income as well as your individual financial situation. Your debts, kids’ school fee, groceries, transportation costs, insurances, emergency funds, retirement funds and other minor expenses that eat away at your paycheck all impact how much you want to spend on rent each month.

The 30 Percent Threshold

When looking for a rental accommodation you also factor in the location, amenities, square footage, commute from work and other such things, some of which you may not be willing to compromise on. All things considered, financial experts suggest spending no more than 30 percent of your combined household salary on rent.

Keeping your rent in check can streamline the 50-30-20 budgeting strategy which in turn can help plan your finances better. The 50-30-20 rule is a smart guideline to better manage your monthly income. According to this rule, 50 percent of your salary should go towards fixed costs such as rent, utilities, transport, school fee and groceries, 30 percent should be allocated to everyday discretionary expenses like entertainment, eating out and hobbies while 20 percent should be set aside for emergency funds, retirement plans, loans and other long term financial goals.

[Related: Why tenants shouldn’t skip home insurance]

Rents in Dubai

The rental asking prices in Dubai have declined significantly over the past two years owing to high supply of residential units in the market. This has also resulted in a move of families from apartments to town houses and smaller villas in search of a better lifestyle.

International City in Dubai stands out as the cheapest residential community with a starting asking rental price of AED 30,000. Other budget communities in Dubai include Dubai Sports City, IMPZ and Discovery Gardens with an average starting rental price of AED 35,000. Even the most popular rental communities in Dubai including Dubai Marina, Jumeirah Lake Towers, Downtown Dubai, Business Bay, Palm Jumeirah, Jumeirah Village Circle, Jumeirah Beach Residence and Dubai Silicon Oasis have seen a significant slash in prices with a median rent of AED 42,000 for a studio apartment.

In keeping with the 30 percent threshold for housing costs, a household with a monthly income of AED 20,000 for instance, with almost AED 72,000 to spend on rent, can now afford a bigger apartment in budget communities like Dubai Sports City or a smaller apartment in popular communities like Jumeirah Lake Towers or Dubai Marina.

Other Costs to Consider

The decision to move to a new residential unit in Dubai should ideally be based on more than simply the rent. Some other costs you need to factor into your budget include security deposits for rent and DEWA, agency fee, municipality fee, housing fee, Ejari fee and advance rent besides other hidden costs.  

[Related: How to convince your landlord to reduce your rent]