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Sun 11 Jan 2009 12:42 PM

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Little confidence in Dubai's rent plan - survey

Arabian Business poll shows almost half think rent index will fail to stop increases. 

The introduction of a rental index in Dubai will have no effect on curbing the spiralling cost of rents, according to responders of an online survey.   

Almost 45 per cent of those taking part in the Arabian Business poll said the rental index, which will set minimum and maximum rents across the emirate would fail to reign in unscrupulous landlords because the regulator will have no powers to enforce it.

The index which has been drawn up by the Real Estate Regulatory Agency's (RERA), is awaiting approval by the Dubai government and is set to be released at the end of this week, following the announcement of the 2009 rent cap - last year this saw a 5 per cent hold put on increases.

Other results from the poll show that around 39 percent believed the index would stop one-off extortionate rent hikes, but would have little impact on overall rises, while 11 percent thought the move would improve the overall situation as tenants would have more power to challenge unfair hikes.

However, only 5 percent believed it would solve all rental problems.

Commenting on the issue last week, Mohammed Khalifa bin Hammad, director of Rera's real estate relation regulatory said: “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."

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.

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abu Joseph 11 years ago

How irresponsible. Here we are in the middle of Jan and no one knows what the rent cap (if any!) will be for 2009. It should be announced no later than 15 Dec. Part of the course I guess.

Jane Eddy 11 years ago

Has anyone considered the possiblility that not all landlords have been greedy and unscrupulous. If some people are fortunate enough to have a reasonable rent, could this not do even more damage in a time when spare cash is being used to keep businesses afloat amid economic chaos. If there is a minimum amount of rent to be paid does this mean the less greedy will have to push up their rental charges and potentially lose tenants of many many years. Why is it a government job to dictate rents, would it not be more advisable to have a watch body or department that can look at indiividual cases and determine if a landlord is being unreasonable and then have the power to actually do something about it?

MasD 11 years ago

I think the Index will come first, then the rent cap. This way, a huge percentage of 2006-07 tenants will get a 30-40% hike instantly and then will be "PROTECTED" with the cap of 5 % next year. And obviously this helps the landlords and property prices. Which for property owners is good but for tenants not so good in the medium term.

paul 11 years ago

Rents cranked up during a boom and the relatively weak attempts to control this failed. Now the market will do the job on the way down too. There are huge swathes of empty apartments that cannot be filled as no one is hiring and plenty of people are leaving. Rents will collapse as surely as the house price bubble. The landlords simply cannot afford to keep all these apartments empty, they will end up fighting over tenants.

dude2000 11 years ago

My employer is down sizing the office to a very few people, relocating people to other countries in the region which far less cheaper to live and operate out of it. Reason being the landlord wants to increase the rent by 40% for contract renewal and the HQ is fed up with negotiating artificial prices within an artificial supply / demand market. We relocated people at lower housing allowance to countries in the region and they are managed to get twice bigger accommodation from what they had in Dubai at almost 40% allowance. Would you think people and business will stay? No because everybody wants to join forces and be flexible to survive the downturn in the economy. I believe the index should be prepared based on actual rents signed (not the asking rent) and should be prepared by a body which sell it to individuals rather than having the government doing it (unless government ensure no one involve in preparing the index don't own or will not a real estate, which is impossible).

Abhay 11 years ago

Am not sure how Rera will calculate the Index but I assume the index will be based on 2008 rentals. Rera should consider rentals of rent contracts which are atleast 3 years old. This is important since this will be the correct indicator of the real rentals. Rental contracts with age of 2 yrs & less should not be considered in the index since these will be the inflated rentals courtesy our greedy landlords and real estate brokers. I am afraid that Rera is actually working for the landlord & real estate brokers lobby. I am not expecting anything positive from Rera. Lets see how this scene unfolds.

Philip 11 years ago

Mr. Abhay is absolutely correct . The index is a guide based on the extremely inflated and frankly exorbitant rates of the last three years . Rent should be no more than 20% of income for any given bracket. So if a average villa is 300,000 per annum then your income would have to be 1.5 million Dhs. per annum, that"s 125,000 per month. Unrealistic for most people and definitely not the average. As usual in Dubai Landlords want to charge the maximum for everything and pay the least for everything. RERA is a joke as they accept that every landlord in Dubai has dozens of brothers and sisters that they want to have living in their properties.

Debby 11 years ago

Most Companies pay a new Hire approximate salary of AED4,000 of which 50% is listed as Basic, 30% is House Rent and 20% as Travel Allowance. An average studio (not new) today rents out at the inflated annual rent of 45,000AED (compared to AED18,000 of 3 years back) so if no sharing is allowed how are singles to manage? Even those earning a salary of AED10,000 pm and have a family here, half the salary goes on rent and another 30% on children's education...The RERA rent index will only be the last straw on the camels back!