New Dubai law allows landlords to increase rents by up to 20%

Tenants paying below average rates for their area will be impacted by the new decree
By Beatrice Thomas
Sun 22 Dec 2013 09:46 AM

Landlords in Dubai will be able to increase rents by up to 20 percent under new laws governing the city’s rental market.

The latest real estate sector reforms, announced by the government late on Saturday, override the 5 percent rental cap and set out new maximum rent increases for tenancy contracts renewals.

Under a new decree issued by Dubai ruler Sheikh Mohammad Bin Rashid Al Maktoum, rent rises can now kick in when a property hits 11 percent below market value for an area, a statement on state news agency WAM said.

If it is between 11 percent and 20 percent lower than the average rent for a similar property, a landlord can increase the rent by five percent.

The maximum increase can be 10 percent if the property falls 21 percent to 30 percent below market rates and 15 percent if the property is 31 percent to 40 percent under average rents.

However, Dubai properties which are more than 40 percent below average rents for similar properties in an area could be subject to rent hikes of up to 20 percent.

The average rent, which will be used as the benchmark for the rises, will be determined by the Real Estate Regulatory Agency’s rent index.

“The decree applies to landlords from the public and private sectors in the emirate of Dubai, including private development areas and free zones,” the statement said.

It said the decree was effective immediately.

It is unclear whether the current caveat on landlords that prevents any rent increase for two years after a tenancy contract is signed will still apply.

The move follows several reforms initiated by the government in a bid to better control Dubai’s real estate market.

CB Richard Ellis said average rental rates for residential property in Dubai increased 17 percent in 2012.

In 2007 at the height of the property boom Dubai introduced a rental cap of 7 percent to stem the city’s over-heated rental market, which was lowered to 5 percent in 2008.

At the time, rent rises of up to 15 percent a year were being reported.

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