x Abu Dhabi, UAESunday 23 July 2017

Dubai rent increases to be triggered when tenants pay 11 per cent below market rate

Analysts said rents would increase, but there should be no major rises. 

Rent increases in Dubai are to be triggered when tenants are paying 10 per cent below the market rate, rather than 25 per cent. Sarah Dea / The National
Rent increases in Dubai are to be triggered when tenants are paying 10 per cent below the market rate, rather than 25 per cent. Sarah Dea / The National

DUBAI // Rent increases in Dubai are to be triggered when tenants are paying 11 per cent below the market rate, rather than 26 per cent.

The new trigger point is one of several changes to the rent-cap rules in a decree issued on Saturday by the Vice President, Sheikh Mohammed bin Rashid, in his capacity as Ruler of Dubai.

Analysts said rents would increase, but there should be no major rises. 

“It strikes a fair balance,” said Ludmila Yamalova, a managing partner at HPL Yamalova & Plewka.  

“The ranges of allowable increases are not drastically different from the previous cap.”

Under the previous rent-cap rules, rents from 26-35 per cent below market rate could be increased by 5 per cent, those 36-45 per cent below by 10 per cent, 46-55 per cent below by 15 per cent and rents more than 55 per cent below market rate could be increased by 20 per cent.

The new trigger bands are 11 to 20 per cent below market rate (5 per cent increase), 21 to 30 per cent below (10 per cent rise), 31 to 40 per cent below (15 per cent rise) and a maximum 20 per cent rise for rents more than 40 per cent below market rate.

Ms Yamalova said the decree was reasonable since the economy had recovered. 

“Landlords had been feeling frustrated since rents really dropped five years ago after the recession. There was a feeling they should be allowed to recoup what they bought as an investment. As for tenants, the amount of increase is still capped.”

Kalpesh Sampat, the director of SPF Realty, too viewed the guidelines as legitimate.

“This basically realigns and adjusts the rental index,” he said.

“It will allow landlords to increase rents but it will not be substantial increases. It’s a fair amendment to the rule in favour of landlords, but it also protects tenants because it controls the amount that the landlord can increase and does not allow rampant increases to the rental amount.”

However, tenants said the decision would hurt them.

“As a tenant I feel bad because I know that at my renewal in April my rent will increase,” said Shahnawaz Kalim who paid Dh38,000 for a Silicon Oasis apartment. 

“Rents in my area are now Dh55,000 so I will have to pay 5 per cent more next year. If we pay such high rents how will we save anything?”

The Dubai Government has also issued a statement encouraging RERA to continue to standardize rent regulation and to enforce laws on all rental properties following the Expo 2020 victory, WAM reported.

“The Expo win is a gift to the people of this country and this Emirate,” said Sheikh Ahmed bin Saeed Al Maktoum, chairman of the Dubai Supreme Fiscal Committee and head of the Expo bid higher Committee.

“It is now all our duty to ensure that Dubai continues to offer great opportunity for business and living.”

Meanwhile tenants in Sharjah have called for a cap on rents sent soaring by residents moving across the border from Dubai to escape steep increases there.

The rent on one-bedroom flats in popular areas such as Al Yarmook and Butina has increased to between Dh25,000 and Dh35,000 from about Dh15,000 a few years ago, The National’s Arabic-language sister newspaper Al Ittihad reported.

Some rents can be even higher again depending on what type of air-conditioning is installed.

The rents on some one-bedroom flats in Al Buhaira, Al Majaz and Al Khan have soared to about Dh45,000, and the price of two-bedroom flats has gone above Dh55,000 in some cases.

Landlords and property agents say the market is governed by supply and demand, but rent rises must not be left to landlords to decide, residents have said.

Ahmed Salah, who lives in Al Majaz and works as a mechanical engineer in Dubai, said: “I hope a cap is enforced to counter the greed of landlords who exploit people’s circumstances and raise rents by more than 30 per cent.”

Sharjah had been regarded as a cheaper place to live and is popular, particularly with families who commute to Dubai.

But rents in border areas, such as Al Nahda and Al Khan, have risen and long-term tenants feel they are being priced out by incomers from Dubai.

rtalwar@thenational.ae