Friday, October 19, 2007

Voluntary rent caps could turn the situation in favour of Landlords

Analysts are of the opinion that imposing a 'voluntary' rent cap, could turn the current situation in favour of Landlords, leading to a rampant increase in rent rates.

This statement came, following a leading government official's statement that Dubai's rent cap may become voluntary, permitting landlords to adjust rents on par with current market rates.

The CEO of RERA (Real Estate Regulatory Authority), Marwan bin Ghalita, said that the cap on price increases for renewed rents, when being renewed during the following year, should be done at a lower level than the current seven percent.

However, he emphasized that in case the commercial or residential property Landlords are of the opinion that the cap is responsible for keeping rents below the market prices, they can argue for an adjustment, based on benchmark rate, recommended by RERA.

According to Bin Ghalita, this system could be successful in reducing situations where the Landlords tend to evict tenants under silly pretexts for the sole reason of getting better rents.

"We will have a rent cap, but will permit the Landlord to adjust the rent based on market value. Both parties should be happy. If you are a tenant staying in an under-priced property, then there should be a way to resolve this. Currently, landlords feel that they have the option of kicking the tenant out of the property and re-renting it. We want to stop this," Bin Ghalita quoted.

He added that despite this, landlords will not be in a position to increase rents during the second year of a contract. In case the Landlords feel that the rent cap is responsible for keeping prices below market rates, they could seek help of Rent Committee to argue their case.

RERA has been assigned the task of registering all rental contracts in Dubai, allowing it to build up annual produced rental price index for every community in the emirate - a benchmark for rental rates.

Currently most residents feel that Landlords with an intention to avoid rent cap for renewal of contracts, are re-leasing the properties to new tenants at a higher rate.

No comments: