Dubai landlords get some leeway on rents

Dubai: While the rental cap remains at 5 per cent for 2011, Dubai's landlords have been afforded some leeway to raise rents if their properties are leased at rates way below what similar ones fetch in the immediate neighbourhood.

Your guide to Dubai rents for 2010

But the rental gap with neighbouring properties should be more than 25 per cent of the average indexed value. The new decree also confirms the Real Estate Regulatory Agency's rent index as the main referral point for any changes to the rental structure.

"With a few exceptions, Dubai remains in a soft rental market, and as such the extension of the cap will not have an immediate impact on the current market dynamics," said Ryan Mahoney, managing director of Better Homes.

"Whatever rental increases there have been in the recent past — and there were some — were unique situations and not representative of the actual market forces. "But the rental cap extension is an assertion by Dubai that it is sticking to the policies that have worked well in the past," Mahoney told Gulf News.

It was only recently that Abu Dhabi too extended its rental cap, again set at 5 per cent.

"There is generally a downward pressure in Dubai; tenants have successfully negotiated their tenancy in various parts of Dubai," Blair Hagkull, the Mena chairman at Jones Lang LaSalle, said. "It has become a tenants' market, and there are pockets that are expected to remain flat."

According to a newly issued Cluttons report, residential lettings witnessed a spurt in September.

"Between October and December, the leasing market moves into a period of calm, and asking rents tend to serve as just ‘place holders' until transactions resume," it said.

"We may see some activity again when some employment contracts expire."

Salient features

• Article 1 sets the rates for the maximum rental increase on properties leased out before its enforcement. An increase can only occur if the property was more than 25 per cent below the average index price.
• If the rent was 26 per cent to 35 per cent less than the average rent for a similar property, the maximum increase shall be equivalent to 5 per cent of the rental value.
• If the rent is 36 per cent to 45 per cent less than the average rent, the maximum increase shall be equivalent to 10 per cent.
• If the rent is 46 per cent to 55 per cent lower than the average rent, the maximum increase shall be equivalent to 15 per cent of rent value.
• If the rent is 56 per cent to 65 per cent lower, the maximum increase shall be equivalent to 20 per cent of the current value of rent.