Tenants anxious over introduction of new house rent index

A new house rent index in Dubai, which suggest benchmark rents for all communities, incorporating all new properties and rental contracts for residential and commercial units into a complete database of rental agreements will soon be published by the Real Estate Regulatory Authority (RERA) in Dubai. This rent index is believed to reverse the gains of seven percent rent cap and in-turn, expected to favour landlords rather than the tenants.

The index will include separate prices for studio, single, double and triple bedroom apartments, and villas in each community, which in-turn will help landlords and tenants to benchmark their rents against the published rents in case of a dispute. It will also help the Rent Committee to settle disputes. The RERA Chief Executive, Marwan Bin Galita, says “We are looking at various factors. The index is a guideline for new people who come to Dubai. The index will be introduced once we are confident that it will help the market. The pricing index is likely to act as a comprehensive guideline to all tenants and landlords in Dubai.”

By the year 2009, the complete database of rental agreements in Dubai will be released, which will include all new rental contracts and properties for commercial and residential units.

The new index has been designed in a manner that ensures that people shifting to Dubai will be provided with a clear picture about the property in specific areas.

Huge rents during the past few years had prompted the Dubai government to introduce a 15 percent rent cap during 2005, which was later lowered to 7 percent, so as to meet the margins of the middle income sector. Although the rent cap managed to stabilize the market to a certain extent, it had to face fresh attack from landlords trying innovative ways to bypass the laws.

Now analysts fear that landlords are likely to take advantage of the new rent index as an excuse to bypass the rent cap. However, Bin Galita assures that there is enough housing supply in the Dubai market, but greedy investors and realty agents are holding the lands behind.

“With new projects coming up, people will not be able to leave their houses empty for a long time once the new index is in place,” he adds.

Posted on 28/5/2008

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