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Reining in Rents
The decision by the Dubai government to rein in rents during the current year has come as a huge relief to just about everyone in the emirate — except the landlords.
However, in the long run, it will benefit every one. Because the move is not just aimed at controlling rent hikes this year but overall stabilisation of the crucial property market. The real estate growth which has been a driving force of the emirate’s economy has slowed down thanks to the global economic meltdown and recession in the region.
No section has been spared, with ordinary people finding it difficult to hold on to their jobs. The new decree will go a long way in addressing the concerns of residents and businesses that have been burdened by soaring rentals for quite some time.
The decree says rents for Dubai tenants whose contracts were signed in the previous year cannot be raised this year so long as the rent is equal to or up to 25 per cent lower than the average market rate. The regulation mechanism will thus bring a sigh of relief to ordinary people, especially the middle-income strata, who feared a sharp escalation in rents owing to discrepancy in the supply and demand of housing units. Moreover, the decision to include non-housing commercial units will also act as an impetus for growth.
However, there are a couple of technical issues that need further clarification. While the Dubai Real Estate Regulatory Authority has issued a point system for evaluating the rental value of property, average rents for properties are yet to be ascertained.
There’s also little clarity on how this evaluation is done. It would be more appropriate if the authorities come up with a clear formula as well as a rent cap for the next couple of years, in order to stabilise the property market shaken by the economic crisis.
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