Landlords hold key to rent cap

Last week’s decree to restrict rent increases in Abu Dhabi has been widely applauded by residents, but it is not just people living in Abu Dhabi who will benefit from the imposed seven per cent per ceiling. The new ruling applies to commercial properties too, and that will be an important confidence boost for companies that have struggled to keep pace with rising prices.

The rent cap will definitely provide some respite for tenants who have seen annual rents jump by more than 30 per cent. However, new ten ants will still be liable to pay the prevailing market rate. You could say, of course, that every silver lining has a cloud, and there are concerns that landlords will seek to replace tenants in order to keep rents in line with the market.

The new law allows an annual rent increase of seven per cent, while previous standards permitted an increase of up to 20 per cent after two years. But the general view is that government intervention to keep the cost of living in the capital in line with people’s ability to pay is both sound and sensible.

From an investor’s point of view, the rent cap might be less attractive in the short term, but buyers of properties need a bouyant market of tenants able to afford their properties if the industry is to prosper in the longer term. A rent cap will help to sustain high demand and allow investors to forecast annual gains in rent revenue.

Overall, the legislation is a good thing as it provides clarity, which in turn helps industry confidence. Clearer rules will lead to more professionally structured leases in line with international standards, which remove ambiguities and are ultimately fairer to both the landlord and tenant.

Dubai and Sharjah too have witnessed massive increases in rents over the last year, with average gains of around 25 to 30 per cent. Dubai announced a rent cap last year, and Abu Dhabi is now following its lead. The authorities have done their part and provided clear direction, it is now up to the industry to ensure proper implementation of the guidelines – and this will be key to their

Last week’s decree to restrict rent increases in Abu Dhabi has been widely applauded by res- idents, but it is not just peo- ple living in Abu Dhabi who will benefit from the imposed seven per cent per ceiling. The new ruling applies to commercial properties too, and that will be an important con- fidence boost for companies that have struggled to keep pace with rising prices. The rent cap will definitely provide some respite for ten- ants who have seen annual rents jump by more than 30 per cent. However, new ten- ants will still be liable to pay the prevailing market rate. You could say, of course, that every silver lining has a cloud, and there are concerns that landlords will seek to replace tenants in order to keep rents in line with the market. The new law allows an annu- al rent increase of seven per cent, while previous standards permitted an increase of up to 20 per cent after two years. But the general view is that government intervention to keep the cost of living in the capital in line with people’s ability to pay is both sound and sensible. From an investor’s point of view, the rent cap might be less attractive in the short term, but buyers of proper- ties need a bouyant market of tenants able to afford their properties if the industry is to prosper in the longer term. A rent cap will help to sustain high demand and allow investors to forecast annual gains in rent revenue. Overall, the legislation is a good thing as it provides clarity, which in turn helps indus- try confidence. Clearer rules will lead to more profession- ally structured leases in line with international standards, which remove ambiguities and are ultimately fairer to both the landlord and tenant. Dubai and Sharjah too have witnessed massive increases in rents over the last year, with average gains of around 25 to 30 per cent. Dubai announced a rent cap last year, and Abu Dhabi is now following its lead. The authorities have done their part and provided clear direction, it is now up to the industry to ensure prop- er implementation of the guidelines – and this will be key to their success.

Source: Emiratestodayonline