Tuesday, January 02, 2007

Real Estate Market likely to soften

According to experts, due to the new decree on rents in place, Dubai can now look forward to softening of the real estate market and lower inflation. This new decree imposed by His Highness Sheikh Mohammed bin Rashi Al Maktoum, the Vice President and Prime Minister of UAE and Ruler of Dubai, will not only freeze rents on certain properties, but will also allow only seven percent increase on others.

The Chief Economist for Dubai International Financial Exchange, Nassar Saidi, mentioned that one of the points to be noted is that the Government is taking policy action, directed from a high level, which actually is an indication to the real estate market and is a welcome sign for tenants. However, the question as to how the Government will enforce the new decree is yet to be answered, he added.

Saidi mentioned that due to the rent caps, and the huge number of upcoming apartments, rental prices may begin to relax. Dubai is likely to witness a softening of the market, which is likely to be more stable, he added. He also mentioned that the decree will help in moderating inflation and estimates that the inflation during 2007 could witness a six to seven percent decrease.

Khalid Maniar, The Founder and Managing Partner of AGN MAK International, a consulting and auditing firm mentioned that the law could probably cause a problem when it comes to involving new tenants. In case the Landlords are unable to increase the rents of occupied tenants, they might compensate for the loss, by quoting high rent rates on new tenants. Hence, he is of the opinion that a rent cap for the entire building also should be enforced.

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