Index fails to fix rental issue

Dubai: Dubai's Real Estate Regulatory Authority (Rera) has revealed a "surprisingly incomplete" rental index with no residential prices or criteria mentioned.

The rental index is intended to give the minimum and maximum rental rates within the different areas of Dubai.

Rera is hoping this index will replace the rental cap eventually.

"The government has already interfered three times to impose rental caps and now there is hope that the new rental index will remove this need," Rera said yesterday in a statement to the media.

Marwan Bin Galita, CEO of Rera, said: "This index is for guidance, not regulation. This will enhance transparency in the market and help investors to have a solid idea of what rent in their investment should be in the coming future based on official statistics."

The commercial index gives the average rental rates for properties, based on road conditions, public parking, location, air conditioning, view and age of the building. Office prices are also dependent on whether the building is on a main road or a small street.

For example, an office on Al Wasl Road has a rental rate of Dh300 to Dh400 per square foot.

An office in a building in Um Hurair has a rental rate of Dh150 to Dh200 per square foot.

Rental prices for residential properties, however, are absent.

"This is incomplete, flimsy and likely to cause even more confusion in the marketplace as the index is almost incomprehensible," said an analyst under the conditions of anonymity.

Officials at Rera were unavailable for comment.

However, Vincent Easton, sales director, Sherwoods, said it is just the beginning, almost a pre-index.

"They've [Rera] have taken the first step in zoning the areas, loading the information and using that as a guide as to what people should pay until they can [do] the final index," Easton said.

Bin Galita had told Gulf News earlier that the rental index would be complete when 60 per cent of all tenancy contracts had been registered with the online system, Ejari.

Residential properties have been divided into apartments and villas and based on the size of the building only, and no other criteria.

While this must be the first attempt at an index, the lack of solid data is going to cause further mayhem in a sector already riddled with confusion.

Landlords are still hiking rents across Dubai in the absence of a new rent cap, despite last year's five per cent cap still being in place.

Many tenants in Dubai are up in arms that their landlords are demanding rent hikes of as much as 58 per cent in some cases.

"My current rent is Dh95,000 per year and is due for renewal on March 1. But, my landlord is now asking for Dh120,000. Dubai Government has said they [landlords] should not hike the rent more than five per cent. I hope this new rule of registering online with Ejari will solve my problem," said Prakash Maruthi, a tenant living in Dubai.

Analysts said the index should only be used as an alternative tool when the market is down.

"The index cannot replace the rent cap because when the index is up, it means there is inflation. Then, the rent cap has to be there, otherwise normal people cannot live," Raju Menon, managing partner at Morison Menon Chartered Accountants, said.

The rental index will work well in Dubai right now as the market is currently in a downturn.

However, when the market goes back up, some sort of rent cap will have to be in place, Menon added.

Rera announced its online tenancy contract registration site, Ejari, last month, which is supposed to give tenants full access to official rental properties and prevent landlord-tenant disputes over unfair rents.