Potential for rent rises in Dubai unnerves tenants

A new rent decree in Dubai that allows increases up to 20 per cent has evoked mixed reactions from tenants and landlords.

Villas in Dubai’s Jumeirah Park where rent increases can be calculated on average. Pawan Singh / The National
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DUBAI // Some landlords and tenants have welcomed new rules that would slow rent increases in Dubai, but others have cautioned against manipulating the market.

Changes to the rent-cap regulations announced on Saturday mean rents can be increased by 5 per cent if they are 11 per cent below the market rate for the area as determined by the Real Estate Regulatory Agency's (Rera) rental index, compared with the previous 26 per cent.

Permitted rent increases continue on a sliding scale up to a maximum of 20 per cent if the rent is more than 40 per cent below the area average.

“I am quite happy with the announcement,” said Christian Herzog, a German expatriate who pays Dh130,000 for his two-bedroom villa in the Jumeirah Village Triangle.

"I am glad that my landlord can increase only by Dh10,000. It is better than Abu Dhabi where the rent cap has been completely removed.

“However, the government should do much more to bring down prices and ensure people get value for money.”

Some tenants cautioned that exorbitant rent rises could lead to the return of the 2008 property crash.

“I don’t see why rents should be going up,” said Pekka Tapio Kangas, a Finnish expatriate who pays Dh125,000 for a two-bedroom apartment in Dubai Marina.

“There are a lot of free apartments. The new decree is not in favour of the tenants. The previous cap was reasonable considering that prices have been going up.

“If rents keep increasing, expatriates will move away from Dubai. And if rents get too high too quickly, the bubble will burst at some point.”

Landlords have supported a free-market approach.

"The new rent cap does give us some respite," said one. "However, the rent cap should be abolished like in Abu Dhabi. Everywhere the market dictates the rents."

He said the rental index should clearly indicate the permitted increase.

“The index doesn’t serve as a proper guide,” he said. “The index range, for instance, of a four-bedroom villa in the Arabian Ranches can be between Dh250,000 to Dh350,000. So, how do you determine how much can be charged?”

But not all landlords favoured the removal of the rent cap.

“A rent cap is necessary to be fair and square to all,” said Prashant Sankhe, who owns a three-bedroom apartment in the Greens and a one-bedroom flat in Jumeirah Lakes Towers.

"A sudden increase is not good for anyone. I don't want to be a greedy landlord. Progress shouldn't be at somebody's cost."

Joey Abraham, who charges Dh300,000 for his villa in Jumeirah Islands, said: “If there are no controls, what happened in 2008 could happen again.

“I am happy to increase the rent annually by 5 per cent. I don’t want to kill the goose that lays the golden eggs. One should not get too greedy.”

Rera’s website on Sunday said its rental index was being updated. The agency did not respond to requests on when the new index would come into effect and if it would set new parameters to calculate rents.

Property agents said the decree was a win-win situation for landlords and tenants and could boost investor confidence.

“The new decree is developed in alignment with the current market environment,” said Ranjeet Chavan, the director of SPF Realty. “The move will provide guidance to both tenants and property owners, bringing them together on the same page. Investors will have better clarity on what rental returns they can expect on their property.”

pkannan@thenational.ae