Rents will fall; Rera revises rental index
Dubai - Rents across most communities in Dubai have been lowered between three and eight per cent.
By Deepthi Nair
Published: Tue 5 Jan 2016, 4:20 PM
Last updated: Wed 6 Jan 2016, 12:31 AM
Hark tenants! For all of you complaining about how the Real Estate Regulatory Authority (Rera)'s rental index is inflated and out of touch with ground reality, there is good news.
Rera has finally updated its rental index at the beginning of 2016. This has helped push rents slightly lower across a few communities in Dubai between three to eight per cent. This means your landlord cannot impose arbitrary rent hikes.
The rental index is used to enforce maximum allowable rent increases on the expiry of a lease in communities across Dubai.
The index has been earning flak from residents in the past few months for lagging reality and not fully reflecting market conditions.
The Dubai Land Department had last year said the Rera index would only be updated once a year, and not every four months. This means the new price brackets suggested by Rera are recommendations for the whole of 2016.
"This fall is in line with the performance of the rental market last year. The largest change has been for the one and two-bedroom apartments, compared to the studio and four-bedroom category," said Hussain Alladin, head of research, GCP Properties.
One-bedroom apartments in communities such as Discovery Gardens, Oud Metha, Dubai Marina, Downtown Dubai and Business Bay are now slightly cheaper.
For instance, the rent for a one-bedroom apartment in Discovery Gardens is now in the range of Dh60,000 to Dh75,000. Earlier, it was in the range between Dh65,000 and Dh75,000.
However, for those tenants on old leases who continue to pay below-market rents, there is no respite. They can brace for more rent increases this year.
Says Diya Jackson, a media professional who rents a one-bedroom apartment in Discovery Gardens: "I pay Dh52,000 for a one-bedroom apartment since I moved in 2009. That is the current rent for a studio here. I will still have to pay more rent during contract renewal next year."
"Since rental rates follow sales prices with a lag, we may continue to witness a softening of rents in the market for the first two quarters of 2016," informed Alladin.
"Given the supply dynamics at play, we feel rents in mid-income communities will remain stable relative to high-end properties, mirroring the price action of each segment in the last 18 months," he added.
Meanwhile, rents are expected to remain unchanged in communities such as Jumeirah, Jumeirah Village, Mirdif, Motor City, The Greens, Dubai Silicon Oasis and Umm Suqeim.
How rent index works
* If the rent of a property is less than 10 per cent of the average rent of a similar property in the same residential area, there should be no increase.
* If the rent of a property is between 11 and 20 per cent less than the average rent of a similar property, the maximum increase is five per cent of the rent value.
* If the rent of a property is between 21 and 30 per cent less than the average rent of a similar property, the maximum increase is 10 per cent of the rent value.
* If the rent of a property is between 31 and 40 per cent less than the average rent of a similar property, the maximum increase is 15 per cent of the rent value.
* If the rent of a property is less than 40 per cent or over the average rent of a similar unit, the maximum increase is 20 per cent of the rent value.