Expatriates living in the Dubai region are hopeful that they may benefit from reductions in house rentals in 2010, the Economic Times reports.
As current rental contracts come to an end, many expatriates throughout the Dubai region are anticipating a reduction in their rental expenses over the forthcoming year. The current economic conditions in Dubai entails that many landlords will be forced to negotiate more competitive deals in order to secure further contracts with their tenants.
Vijayan, a long-term Dubai expatriate, told the Economic Times that current rental prices were not reflective of the current economic circumstances: “By all logic, rents ought to be far lower and so tenants are waiting till the last minute to pay the next set of rent checks. The landlords are holding firm on the rentals, hoping to extract the most, but the tenants are calculating that rents have to fall steeply in January when the real picture emerges. By then, many would have decided to return home for good leaving a large stock of vacant apartments seeking tenants.”
January is an important time of the year for landlords in Dubai as it marks the period whereby most rental contracts are renewed and settled through the payment of 12-month post-dated checks. This year, however, expatriates may be demanding lower rents prior to agreeing contract renewals as a result of economic conditions in the emirates. For many, this may be crucial, as those outlaying 12 month checks cannot be assured of maintaining their current financial status yet will be expected to maintain provisions for the settlement of checks, even in the event they lose their jobs and are forced to leave the country.
What is for sure is that the majority of rental charges in 2010 will not increase. The Vice President and Prime Minister of the United Arab Emirates, and Dubai Ruler, H.H. Sheikh Mohammad Bin Rashid Al Maktoum has issued a new legislation which places a cap on rental increases. The decree has specified that the Real Estate Regulatory Authority (RERA) rent index needs to be utilized as the main reference in determining average rents upon which rental increases in 2010 can be determined. Rental increases will only be permissible for those properties whose current rental value is more than 25% below the average index price. For those properties whose rental charge is between 26 and 35% below the average the permissible increase is limited at 5% of the rent charged during 2009. For those properties whose rental charges are between 36 and 45% below the average charged on similar properties the maximum increase permitted will be 10% of that charged in 2009 and those that were 46 to 55% less will be able to increase rental charges by 20% of the rental value in 2009.
The legislation is aimed at regulating the property market and improving relationships between landlords and tenants.