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Dubai: Officials, brokers and developers have hailed the Dubai government's decision to lower the rent cap to five per cent from its earlier seven per cent.
His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, on Friday issued a decree lowering the rent cap.
With this, Dubai now has the lowest rent cap in the country. Abu Dhabi has seven per cent while Ras Al Khaimah and Fujairah both have 15 per cent.
The rent cap in Sharjah is based on the market price in the third year of tenancy renewal, with the first two years having zero cap.
"This is a very good and timely decision and we hope this will help the market stabilise," Mohammad Sultan Thani of the Dubai Land Department told Gulf News yesterday.
"The five per cent rent cap applies to new tenants and to those whose rents were not increased last year. However, there should be no increase in rents for those whose rents were increased last year. For them, the cap is zero per cent."
Brokers were cautious in reacting to the move.
"It's obviously a great deal of wisdom, good for taming inflation," said Elaine Jones, chief executive officer of Asteco, one of the largest real estate management companies in the UAE.
Rising house rents, traffic congestion, the increasing cost of living and the falling value of the dollar remain prime concerns for the 1.44 million residents of Dubai, where the economy is seeing explosive growth.
Dubai's gross domestic product (GDP) has been growing at roughly 16 per cent year on year for the last three years.
Tenants have been seeking the government's intervention to protect them from seemingly excessive rent hikes - which even ranged from 40 to 1,000 per cent during 2004-05, making life in Dubai unecon-omical for many.
"Although Dubai always advocated a free economy, this intervention was necessary and has worked well for the residents," Jones said.
"My only concern is the huge disparity between the rents charged to different tenants in the same property or building. Someone who has been in one apartment for ages will pay much lower than those moving into a similar apartment in the same building, creating a huge disparity."
She said it would be ideal if Dubai had a rent guideline for various neighbourhoods and across various property segments.
Benchmark
"We need some kind of guidelines for rental rates to benchmark on," she said.
The newly created Real Estate Regulatory Agency (Rera) is set to issue a real estate benchmark report that will help the stakeholders determine land prices and rents, based on a projection of housing demand and supply.
"We have finalised the study and before the end of the year, we will formally announce our findings and subsequently launch the real estate index, that would define the market in the coming months and years," Marwan Bin Ghalita, Rera chief executive, told Gulf News recently.
At present, due to the lack of market data, individuals and brokers quote their own estimates and figures, mostly suited to their own marketing needs.
According to a recent Dubai Chamber of Commerce and Industry (DCCI) study, the housing supply for the next seven years will exceed 131,000, based on the estimates a few months ago.
However, the new developments announced following the study, raises the supply to more than 160,000.
"We expect the market to stabilise by mid-2009 as there is a huge supply coming in. By mid-2009, we expect the housing inventory to be sizeable enough to meet the demands," Jones said.
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