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Tue 6 Jan 2009 01:04 PM

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Dubai rental index awaits roll out

Rent calculations aim to end landlords over-charging, protect tenants living in emirate.

Dubai property watchdog Rera is poised to roll out its eagerly anticipated rental index, it was reported on Tuesday.

Rera’s (The Real Estate Regulatory Agency) index will calculate rental prices for a range of properties across the city to control spiraling rents, the main driver of inflation in the UAE.

“The rental index for residential and commercial units is ready and will be launched soon. The regulations for its implementation have been finalised but are awaiting approval from the Ruler's Court,” said Mohammed Khalifa bin Hammad, director of Rera's real estate relation regulatory, in comments published by Emirates Business.

High rents have long been the bugbear of many residents in Dubai. Experts say the index will give greater transparency to the rental system, helping stamp out cases where tenants are over-charged.

It is understood the index will come into effect at the end of next week, setting minimum and maximum rents landlords can charge across various developments in Dubai.

Not only will the index help iron out disputes between landlord and tenant, it will be compulsory to adhere to for all those wishing to let properties.

In 2008 the rental cap in Dubai -set by the government- was 5 percent, which has remained unchanged.

Throughout Dubai’s six year real estate boom rental prices soared as supply struggled to keep pace with rampant demand.

Now with property values are falling and a global recession looming landlords are piling into the rental market, pushing rental prices down.

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Skeptical 11 years ago

Ok, I am a reasonably intelligent person but I am not understanding the benefit of setting a "minimum" that a landlord can charge in rent unless the reason is to help these landlords who might be having tenants in their properties for the past 4+ years. Any long time tenants, whose owners followed the rental caps, are probably still paying much lower rental rates than their neighbours. By setting a minimum would these tenants have an automatic increase in their rents?? My colleague currently pays AED 110,000 a year for a 3 bedroom villa in Mirdif. He has been their 5 years. His new neighbors pay AED 190,000 for the same villa and they are pretty happy with their rent when they compare similar 3 bedrooms in other parts of Dubai. If RERA says a 3 bedroom in Mirdif should rent for a minimum of AED 150,000 and maximum of AED 230,000 (for example), would my colleague automatically have an increase in his rent and need to come up with AED 40,000 more? Can someone help me out here??

troy 11 years ago

They should leave the rental rates to demand and supply...Landlords will ask for a price and if there is no interest then there is no options but to go lower or just leave the unit empty!!! The market should dictate the correct rental price, not RERA. i think the rental cap is a sufficient tool to control inflation...On what basis will they set the index? Current rental prices or 07 prices or their own judgement of a fair price!! If this is the case then RERA should introduce a price per sq foot index for sales as well, at least to put a bottom to this terrible crash in the secondary market. In fact, this would be a much better idea as there is currently huge variation is property prices and you can no longer know where value is.

Sal 11 years ago

I don't understand why authorities are making wrong decisions at the wrong time. Like visa fee increases, interest rates are not cut, banks are given no loans (it should be opposite to revive economy) cancellation of residents visas for investors etc. So based on last year when they started working on the index, that was the peak of real estate in Dubai was it? See for example if RERA sets 100,000 for a 3 br in the Springs and you would get less than that (e.g. in 2005 it was around 80,000 and I am sure rents will fall to that level soon) the tenants are going to suffer again. My advice is RERA should delay their indexing until the market stabilizes or hits the bottom one of which is going to happen in next 4 to 6 months.

Masd 11 years ago

I think it is a good initiative. Just as there are speculators who ruin the market, I believe there are scavengers who try to crash the market. We all know that there will be oversupply in the Dubai market in 09 by probably a ration of 2 villas to 1 demand. Therefore, if this measure is not taken, we could have seen prices like 90K for a three bedroom villa in Arabian ranches easily. And nobody wants that, it is not fair to the investors, nor the health of the market. People in this country make quite decent amounts in salary. So don't complain.

TurkishGuy 11 years ago

I see this initiative as a step to rescue the landlords not the tenants. If RERA was sooooo interested in protecting the rights of the tenants and worried about the ever-increasing rents, they should have stepped in a couple of years ago when the whole city was on fire. Now that more properties are coming into the rental market, more vacancies are around due to people leaving, they come up with this brilliant idea of setting a minimum and a maximum. What happened to the famous saying of "market should dictate the rates"? I say, let market dictate the rates now too and see what happens. And I guess you are right Skeptical about the way this will be implemented. If your rent is below the minimum rate set for your area, your landlord will be able to raise the rent to that amount no matter what percentage that means.

michael 11 years ago

I don't trust these guys at all... With the property market falling and people being made redundant and leaving Dubai, rents should fall significantly if left to natural supply and demand theory. I think that such a cap will under the current circumstances increase rents beyond their natural price equilibrium... hence, with such a cap, Dubai gov can insure higher rental yields for investors and prepare a softer landing for their crashing property market!

Rainigade 11 years ago

I'm thinking that Masd has obviously invested in a property in Dubai, which is why he wants the investors protected by such a ridiculous measure as "minimum" rent. Lets be really honest here - there is NOTHING wrong with paying AED 90,000 for a three bedroom villa in Arabian Ranches. The meteoric price rise of rentals in Dubai have made investors greedy. Just a few short years ago, a two-bedroom villa in the Springs costed AED 85,000 and as DINKs we found it slightly expensive for our budget then.... and totally out of our budget now. I have been here since 1997 and prices of villas then were even less than that. Lets stop the madness now. Instead of a 300% rise in prices... we might fall back to a 100%. People still gotta live. And Masd - YOU may be earning a salary good enough to afford ridiculous rental prices. Most of us can only get by with a one bedroom so that we can still save something at the end of the month! Lets be reasonable, shall we?

Philip 11 years ago

I agree there is nothing wrong with lower rents, Not too long ago you could get a nice 3/4 bedroom villa with a decent garden for well under 100K maximum in Jumeira with a beautiful established garden. Long timers thought that was expensive.Landlords were not that greedy and didn't expect immediate and massive returns on their investments but a nice steady income. Then came the developers and taught them new tricks and unlimited greed. RERA is not on the tenants side if it was there should be no minimum , the market should set that.