Abu Dhabi reinstates 5% rental cap

Rent increases specified in tenancy contracts cannot exceed 5%, announces Department of Municipal Affairs and Transport

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Abu Dhabi: The rental cap in the emirate of Abu Dhabi has been reinstated and landlords and property managers cannot increase rents by more than five per cent per year, it was announced on Tuesday.

A statement sent by the Department of Municipal Affairs and Transport (DMAT) on Tuesday announced that the rental cap outlined in Law No 20 of 2006, which was abolished in 2013, now applies once more. As a result, any rent increase specified in tenancy contracts cannot exceed the annual five per cent cap.

Rents in Abu Dhabi have long been a major drain on residents’ incomes, and they continued to increase after the removal of the rent cap three years ago. As reported by Gulf News, some residents reported that their rents had doubled or even tripled following the withdrawal of government regulation on rent hikes.

Real estate analysts, however, noted a decline in rents this summer, which has been linked to the worldwide decline in oil prices.

“People have lost their jobs and others have seen decreases in their housing allowances. So, although the supply of residential units in the capital city still trails demand, there was a fall in rents, even for prime units,” Mai Hassan, senior analyst at real estate service provider JLL Abu Dhabi, told Gulf News.

“Landlords are trying to maintain occupancy, so rent increases are unlikely to exceed five per cent this year, even in the absence of the cap,” she added.

Hassan said rents had fallen by about three per cent for prime residential units along the Corniche, on Reem Island and Al Raha.

“Although we do not track older units, we believe the decline in prime rents means that rents in Grade B apartments have fallen even more, especially as they must be struggling in the difficult market conditions,” Hassan explained.

She added that the effects of the rental cap would be felt when the market starts to improve.

“Even though oil prices have started to rise, next year is expected to be difficult. So maybe we can see an upward trend in rent only from 2018 onwards,” Hassan said.

Despite the limit on increases, some residents in Abu Dhabi appeared worried about how landlords will interpret the law.

“We live in a three-bedroom apartment in Al Zahiyah area, and pay about Dh100,000 per year as rent. Given the market situation, we were hoping that rents would fall. But this rent cap might be seen as an opportunity to increase rents by five per cent,” H. Mansoor, a 29-year-old business support executive from Pakistan, said.

Lubna S., an Indian homemaker, said the rent for her three-bedroom apartment was Dh110,000. “The talk of a rent cap might just prompt increases, and this would be very unfair to tenants in today’s economy. In fact, most people believe there should be an overall revision of rents in Abu Dhabi. Even last year, our landlord tried to increase the rent by 10 per cent,” she added.

Others were more optimistic that the rent cap would put an end to unfair rent hikes.

“Landlords are still trying to get people to pay more. The rent for our one-bedroom apartment in Al Nahyan is Dh85,000, and the landlord wanted to increase it by nearly Dh5,000 this year. This would amount to more than five per cent. But we were able to convince them against the increase,” he said.

“So, even if landlords put forward a five per cent hike, I think tenants can plead their case in today’s market conditions,” he added.