Abudhabi, January 14Dubai on Thursday unveiled a new ‘slab’ system to determine and regulate rent hikes. A new decree issued by Shaikh Mohammed provides clearer and specific guidelines to landlords to implement rent increases.
A new decree issued by His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE, in his capacity as Ruler of Dubai, provides clearer and specific guidelines to landlords to implement rent increases.
The decree replaces an earlier procedure that allowed landlords to implement a flat seven per cent hike if the rentals were more than 25 per cent below the average price index set by Dubai’s Real Estate Regulator Authority or RERA.
The new decree sets the rates of maximum rent increases that can vary from five per cent to 20 per cent depending on the extent of difference between rent value set by the RERA Index and the prevailing rental value.
However, as was in the earlier regulation, any rent hike can only be implemented if the property rent was more than 25 per cent below the average index price.
If the rent was 26 per cent to 35 per cent less than the average rent for a similar property set by the RERA Index, the maximum increase shall be equivalent to five per cent of rent value, according to Wam.
In cases where the rent was 36 per cent to 45 per cent less than the average rent for a similar property, the maximum increase shall be equivalent to 10 per cent of rent value.
If the rent was 46 per cent to 55 per cent less than the average rent for a similar property, the maximum increase shall be equivalent to 15 per cent of rent value.
For properties with a rental rate that was 56 per cent to 55 per cent less than the average rent for a similar property, the maximum increase shall be equivalent to 20 per cent of the rent value.
The decree endorsed the RERA rent index as the main reference to determine the average rent in the emirate.
The decree came into force from the date of its issuance on January 10, 2011 and will be published in the official gazette.
Dubai took the first step to contain rent rally in January 2007 by imposing a cap of seven per cent on rent increases on all properties. The rule was applicable to all rent contracts that were to be renewed in 2007 on the condition that no rent increment was made on that property in 2006.
In December 2009, Shaikh Mohammed issued another decree to set a formula to be used for the rent index. Under the decree, a property’s rent can only be raised if it is at least a quarter below market values determined through an index set by RERA.
The decree endorsed the RERA price index as the reference for setting any increase in rent values in 2010. RERA’s price index, first issued in early 2009, was revised in May the same year to better reflect rent realities.
–Agencies