Tuesday, January 20, 2009

No rent increases in 2009...unless...

Once again it's needed The Big Boss to step in to sort out a confusing situation and a problem damaging Dubai's future.

Dubai's future relies on its commercial success but ridiculously high rents have put an increasing burden onto employers, making the cost of doing business here increasingly uncompetitive. High rents are also making employees question whether Dubai is an attrractive place to live and work, which also hits the commercial sector.

For example, rent for a two bedroom apartment in a less-than-luxury Dubai Marina block is at AED180,000pa. Per month that's over US$4,000 or €3,000 or UK£2,750.

We've had the rent cap, which was at 5% last year, and have been waiting for this year's announcement.

A week ago the CEO of RERA, Marwan Bin Galita, said "We don't need a rent cap this year. We need to freeze everything. 2009 is a tough year and we shouldn't interfere with rents too much."

That caused some confusion - What would be frozen, last year's rent cap? Would there be a new rent cap? If so, what would it be? Does 'not interfere' mean leave it to the market?

Now we know the answers. As Ruler of Dubai Sheikh Mohammed Bin Rashid has issued Decree No 1 for 2009. It applies to residential and non-residential properties, not allowing any increase in rent in 2009 for tenants who renew contracts signed in 2008.

However, it gets a little complicated because if similar properties have an average rent according to RERA's rental price index which is more than 25% higher, then the landlord can increase the rent.

Well that's how I interpret the reports, but you'd better read for yourself if you think it affects you. EmBiz247 has it here.


Let's hope it works because rents were really out of control.

14 comments:

samuraisam said...

Any idea where can the RERA rent index be accessed?

samuraisam said...

oh found it: an excel document on the RERA website

Amazing that they figure the best way to share this info is through an excel document.

ALINA said...

Of course there's not going to be any increase as more and more people are leaving, properties are left without tennants and people are reluctant to pay the huge amounts landlords are asking. Looks like RERA actually does nothing at all!

samuraisam said...

Ok, looks like i'm fkd.

Does anyone know how much the landlord can increase rent if it is 25% below the RERA index value?

Seabee said...

Sam I'm guessing because the stories I've read aren't specific but I'd say he can raise it to the average on the index, regardless of the percentage that entails.

the real nick said...

Sam,
I guess you better keep your head down and don't tell the landlord about the index. I'd imagine that Sheikh Mo's decree to freeze the rents would take precedent and do what it says on the tin: prevent any hike for 2009 if you renewed during 2008. In which case the index is irrelevant.
Bad luck if you are paying over the index value - it's frozen at a high level...?

samuraisam said...

So pretty much this means the landlord can potentially increase it by 100 grand in an instant, which is a near 60% increase. It really sounds as if this was thought through.

Mars said...

i heard this was a bad thing because many were expecting rents to go down - freezing it just leaves the high price as is.

Rose in Dubai said...

clear as mud as usual then....

samuraisam said...

There is more info on gulf news:

"The decree also defines a new formula for lower rent values which allows a proportional increase in rents for 2009. According to the new formula, the increase in property rent will rise in proportion with the drop in 2008 rent value in the average annual rent for the same property."

Whatever that means.

samuraisam said...

sorry, that was meant to read more info on WAM

Seabee said...

Sam, I didn't put a link to the WAM story because the explanation was even less understandable than the other reports.

"the increase in property rent will rise in proportion with the drop in 2008 rent value in the average annual rent for the same property"

Anybody?

rosh said...

The decree paves way for ridiculous rent increases on older homes and tenants - to match, albeit, highest prevailing market rates.

Sam, my folks got screwed ('cause SHJ had a similar decree) - 100% rent increase on a 35 year old villa. Maintenance from landlord since construction - zip!

the real nick said...

@ Sam:

Emirates Business 24-7 lays it out today:

http://www.business24-7.ae/articles/2009/1/pages/01212009_295c9ceef41f423d99c70464898637e8.aspx

see Specifically Article 2