Sunday, March 2, 2014

Dubai’s ruler issues new decree for controlling rental hikes

Dubai’s ruler Sheikh Mohammed bin Rashid Al Maktoum has issued a decree to govern changes to property rates in the emirate. The step has been welcomed by analysts and tenants alike, assuaging concerns surrounding property price hikes following the Expo 2020 win.
The new law (or decree No. 43) stipulates that increases to property rentals can only be decided by a determined average for properties in a particular area. This average will be determined by the Real Estate Regulatory Authority (RERA). Landlords will not be able to arbitrarily raise rents on their own whether for residential or office units. The decree outlines a band that will act as a guide for landlords when increasing rental rates.
So what does this mean for tenants? Well, in simple terms, landlords will not be able to increase rents if a property’s rent is just 10 percent below the market average for that area. This rule applies to both public and private units as well as free zone areas. Tenants can check the Dubai Rent Index on RERA’s website to find out more about average property prices. The Index is currently being updated.
In a nutshell, landlords can increase rents when renewal time comes according to the following parameters:
  • A five percent increase if the rental rate is 11 to 20 percent below the average rent.
  • A 10 percent hike if rent is 21 to 30 percent below the market average for similar units
  • A 15 percent rise when rental is 31 to 40 percent below similar units
  • A 20 percent hike if a unit’s rental is more than 40 percent below the market average for the same area
The decree is valid from the date of issue of December 18th, 2013 and should be followed by all relevant parties.
Analysts have said the new rules should bring peace of mind to tenants as landlords will not be able to arbitrarily increase rents. In November, Dubai won the bid to host the Expo 2020. The preparation to host the six-month global exposition is expected to bring in foreign capital and contribute positively to Dubai’s economy with massive developments planned and others to be announced. With this, many residents have been worried about property prices rising and the market heating up. The recent decree is part of several steps taken by the government to control speculation.
A few months ago, property registration fees were doubled from two to four percent. The Dubai government also created a court dedicated exclusively to solving commercial and residential property disputes.
Dubai has been restarting a number of its stalled projects from the days of the financial crisis and announcing new developments. Among those new undertakings is the Mohammed Bin Rashid City, which will be home to 100 hotels, a park larger than London’s Hyde Park, a theme park, and the biggest shopping mall in the world. The emirate is also building the world’s largest Ferris Wheel on a man-made island off the coast adjacent to Jumeirah Beach Residence.

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