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Mixed reaction to new Dubai rent cap

DUBAI — The city’s tenants have said rent caps mean little unless salaries are increased while landlords and real estate companies yesterday called for the introduction of the 5 per cent rent cap to be enforced across the board.

The comments came yesterday after an announcement by the Dubai Land Department, the Real Estate Regulatory Authority (RERA) and Dubai Municipality’s rent committee to enforce a decree by His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai. Decree No.27 for 2007 states that “rent will be capped by 5 per cent in 2008 and current for two years.” Landlord Mohammed Jafar said he was happy to abide by the rent cap as he believed rent was already high.

“I believe there should not be an increase in rent because it’s a burden that’s getting heavier day by day,” he said. “Five per cent is quite reasonable. It should be optional because of the different scenarios — not everyone can afford not to increase and the value of properties in different areas is different.”

Tenant J.J. said although the rent cap would be helpful, more needed to be done to increase salaries in line with the rising cost of living.

“The rent cap is irrelevant because whatever they do to allow a rent increase has to be coupled with a related increase in salary,” he said. “It doesn’t matter as salaries don’t increase. Nobody can afford the Dubai dream.”

The rent cap will become effective from 2008 while new regulations to stabilise rents were being considered for 2009, according to Land Department Director-General Sultan Butti bin Mejren.

“The Land Department is already looking at new regulations to stable the rents. There are several schemes and studies to find solutions for high rents in 2009,” bin Mejren said.

RERA Chief Executive Marwan Bin Ghalita said, “The decree emphasised that rent contract signed in 2007 to 2008 are not to be increased. Which practically means that no rent increase is allowed before two years passing on any contract.”

Shaikh Mohammad had ordered a 15 per cent rent cap in 2006, after which he decreased the cap in 2007 to 7 per cent.

Dubai Rents Committee Secretary-General Mohammed Ahmad Al Shaikh yesterday clarified that a contract with a rent increase in 2007 was current for two years and could not be increased again until 2009, and then only within the rent cap.

Bin Ghalita said landlords whose rents are lower than the market value could protest through the rent committee.

Landlord Suhail Iqbal said regardless of what the rent cap stood at it still meant an increase in rent when costs were already high.

He, however, said he could understand the need for landlords to increase as related real estate costs - such as advertising had also increased dramatically.

“There has to be a commitment that a two-bedroom house for example - should be between this price range, rather than a rent cap,” Iqbal said. Tenant Renjit Appukuttan said he was more concerned about the rising cost of other living expenses.

“For me there hasn’t been an increase for two years,” he said. “The rent cap is very important but what about how expensive other living costs are.”

Nagesh Rajan, another tenant quipped that the Rent Committee had to ensure that the landlord keep up with the regulations. “Though the new rent cap is welcome, the Rent Committee must ensure that the landlords don’t act in an errant manner. There have been many cases in which the landlords increased the rent much above the rent cap. They are not concerned about the law. The committee should carry out surprise inspections in the different buildings and make them act according to the law.”

The chief executive of RERA also said a new electronic registry system for new and old rent contracts and for all types of properties will be operational from the New Year’s day. This will assist in finding a rent data base which will make the whole procedure more efficient and transparent. Bin Galita expressed confidence that all real estate companies will abide by the new regulations.