Dubai: Future rent increases in Dubai will be decided by a weighted average of what properties in that particular area command rather than an arbitrary demand by a landlord. It applies equally to residential and commercial realty in the emirate.
This will be the natural result of a new decree issued by His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai. The Decree, No. 43 of 2013, sets a specific band on how the optimum rental increases that a landlord can demand while renewing leases.
The new rental slab will not allow landlords to raise rents on renewals if the current lease is only 10 per cent lower than the average rent of a similar property.
It will be applicable to private and public sector owned properties in Dubai, as well as — pertinently enough — within the free zones. The Decree thus brings the future setting of lease terms and renewals more in sync with the Dubai Rent Index brought out by the Real Estate regulatory Agency.
Landlords can raise rents on renewals by:
- 5 per cent if the earlier rental is 11 to 20 per cent lower than the average rent for a similar property;
- 10 per cent if the rental is 21 to 30 per cent lower than the current going rates for properties of a similar scale;
- 15 per cent if the rent is as low as 31 to 40 per cent than comparable ones; and
- 20 per cent if a property’s rental is more than 40 per cent less than the average.
In a statement, the Dubai Government emphasized the need to abide by the new regulations. The Decree takes effect from the date of issue and will be published in the gazette.
“There were several controls already in place, such as the rent cap, to ensure landlords could not arbitrarily hike rents on renewals,” said Niraj Masand, partner at the real estate services firm Banke M. E. “The creation of the rental slab and the strict parameters on when and by how much hikes can be effected will have a significant impact on market dynamics.”… see more