Agents ignore Rera index, charge higher rents

Rera official says no penalty against landlords hiking rents beyond index average, while industry sources say index only applies to leased units

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Big jump: In many areas across Dubai the asking rate is much higher than Rera index average, leaving residents confused
12 XPRESS

DUBAI: Owners and real estate agents are asking up to 50 per cent more than the average updated rent index in Dubai, an XPRESS survey has found.

Based on a listing of apartments and villas on property classifieds, asking prices have spiked considerably compared to the index that was updated in April.

For example, while the average index rate for a two-bedroom unit in Dubai Marina is Dh120,000, an advertisement for a unit in Marina’s Quays West tower is quoted at Dh175,000, a 45-per cent increase. A four-bedroom apartment in JBR has an index average rent of Dh200,000, but some owners are asking for Dh300,000, a 50-per cent jump.

The Real Estate Regulatory Agency (Rera) Index, first used in 2009, is a sliding rule, updated frequently, that prevents exorbitant rent increases.

many factors at play

A number of factors are at play according to a broker. Mohammad Kazerouni, who has been in the real estate industry for 10 years, said: “It’s demand driven, an unintended outcome of the Arab Spring and UN sanctions -- there’s a massive movement of business from Egypt, Syria and even Iran to Dubai. These companies bring in people who need both office and living space.”

Kazerouni added more multinational companies, schools as well as manufacturing facilities are coming up in Dubai. “I had people calling today [Monday] looking for over 100 units as school staff accommodation,” he said.

He reckons the index works fine and protects existing tenants, but not new renters.

“It [rent index] applies to units already rented out. If you have a tenant, you can’t raise more than the allowed rate,” said Kazerouni.

Pavan, a real estate agent, said that high rents affect fresh renters or those upgrading to bigger units. “If your apartment is empty, you don’t have to follow the index. You can rent based on your desired rate. If there are takers, good for you,” said Pavan, who has been in the real estate industry for six years.

“There’s nothing wrong with the index. It goes by averages. But since last year we’ve seen a 20 to 25 per cent increase in rents. At the same time, buying and selling of property is up 20 per cent,” he added.

Laura Choueri, managing partner of Choueri Real Estate, said: “Prices change depending on market conditions. Higher rents are more likely to apply to first-time renters.”

INDEX NIXED

While the index regulates the realty market, some owners and real estate agents claim it is outdated, and does not reflect market realities. A senior official at the Dubai Land Department (DLD) said this isn’t true. Mohammad Khalifa Bin Hammad, Head of Real Estate Relations Management, Rera, the regulatory arm of DLD, said: “The rental index is available on the DLD website, and it is regularly updated on average three times a year, around every four months.”

“The index is updated through rental data collection from several sources. These include leases recorded at the department, field surveys and follow-up of units available for rent through billboards, newspapers and websites. These are also based on periodic meetings with real estate companies and landlords during which data is collected, compared and studied continuously to identify the variables and factors in rental values. We prepare reports to update the index periodically.”

He said landlords will not be penalised for raising rents beyond the index, but tenants can refer to it if they want to dispute the increase. “There are no financial penalties [against owners], but if the owner raises the rent more than the planned increase and the tenant doesn’t want to pay, the tenant has the right to file a complaint against the owner with the Rent Committee of Dubai Municipality. The committee will judge between them,” he said.

RENT INDEX

As per Law No. 2 of 2011, rents can be raised from five per cent to 20 per cent based on the difference between existing rent for a property against the average rent of a similar property in the same area.

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Latest Comment

Sudden increase in rent has disturbed our life and budget. No prior notice was given by my landlord for increase in rent. Is there any rule and regulation for increasing rent and staying in villa. Any time any month he will come and ask for rent hike. Can anybody tell me were we can complain for this. As staying in villa we dont have any contractwith landlord so he charges whatever he wants. So please let me know the right place to complain for this.

Lodhi Azmatullah

23 May 2013 13:46jump to comments
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