Tuesday, January 18, 2011

New decree in Dubai maintains rent cap

According to a new decree issued by the Ruler of Dubai, Sheikh Mohammed bin Rashid Al Maktoum, the rents of properties in the emirates can be raised only if the rates are below 25 percent of average index price set by RERA (Real Estate Regulatory Agency).

For instance, if the rent was 26% to 35% less than average rent for similar property, the maximum increase is limited to 5percent of total rent, while in cases where the rent is 36% to 45% less than average rent for similar property, maximum rise will be 10percent of rent value. Instead, if the rent was 46% to 55% less than average rent for similar property, the maximum rise will be equivalent to 15percent of rent value, and for rents less than 56% to 65% less than average rent for similar property, it could be 20% of total rent being the maximum increase, the Decree No.2/Year 2011 stipulates.

The decree, effective 10th January 2011, endorses RERA's rent index as the main reference to determine the average rent in the emirate.

However, despite the fact that RERA rental index is based on actual rental transactions in Dubai, several landlords and agents are yet to register contracts on Ejari, the e-registration portal system, an industry expert said.

The RERA website still carries a notice urging landlords and property leasing and management firms to register rental contracts on Ejari, or face penalties. In cases of violations, RERA imposes penalties of up to Dh.50,000, apart from the fact that tenants will not receive DEWA, due or etisalat connections.

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