Link 16 new - SCLG

16 Retail
Lisa Dale discusses the economic ramifications of the 2007 Rent Cap Law
‘To Cap or not to Cap?’
The majority of Dubai’s residents are
tenants – whether of residential premises,
business premises or maybe both. Rents
are therefore a major overhead that
directly and significantly impacts on the
cost of living, which drives inflation. The
massive rent increases witnessed since
2001 have caused some businesses and
families to question whether they can
afford to live and work in Dubai.
Lisa Dale
Head of the Property Department
Al-Tamimi & Company
‘To Cap or not to Cap?’ a question that has
devoured endless hours of debate and
discussion in Dubai over the past
two years when in 2006 the Government
of Dubai issued the first Rent Cap
Law capping any rent increases to 15
percent. This was recently followed by
Dubai’s second Rent Cap Law for
2007 which introduced a cap of 7 percent
on rents.
This debate was discussed further recently
at the Dubai Property Group’s (DPG)
monthly networking event, which hosted
Lisa Dale, Head of the Property
Department at Al-Tamimi & Company,
who discussed the new provisions of the
Rent Cap Law 2007 and its effects on both
landlords and tenants, and the health of
Dubai’s economy as a whole. She also
discussed how the law affects different
rent and lease agreements which were
agreed before the issuing of the law.
"The Rent Cap Law will act as a stabilising
factor in the booming real estate sector in
Dubai and will help both landlords and
tenants make longer term decisions," said
Adel Lootah, Executive Director of
Dubai Property Group. "In this respect,
DPG will act as a forum for the real estate
industry to express their opinions and
feedback with regard to the Law, and
will raise these issues with the
relevant authorities."
“
The massive rent
increases witnessed since
2001 have caused some
businesses and families to
question whether they can
afford to live and work in
Dubai
”
"The capping of rent increases is an
effective method of slowing down the
huge hikes in rent that have been
witnessed in Dubai over the last five years
in the interests of bringing stability to the
market and confidence that Dubai will
remain a competitively priced place to live
and work in the short and medium term,"
commented Lisa Dale. "The Government’s
Rent Cap policy was designed to meet this
challenge head on. For Dubai to retain its
position as a business hub for the region
and for it to sustain its current growth
path, it must remain competitive."
"The Rent Cap policy that was introduced
in 2006 and which has brought further
rent increase restrictions for 2007 will, I
believe, give confidence to all those
businesses and workers that represent
Dubai's potential for growth in the future.
However, I do question whether simply
imposing a mandatory rent increase
cap on all landlords and tenants and in
respect of all properties is a total solution,"
she continued.
Firstly, the Law assumes that a rent being
paid by a tenant is representative of
market value in the first place. Cases have
emerged where new shopping malls and
commercial complexes, where a developer
will offer discounted rents during the first
year of operation as an incentive to attract
tenants to the development. Landlords
who signed such tenancies in 2006
cannot now apply any increase in the
rents in 2007 to bring them in line with
market rates.
Supply Chain & Logistics Group | www.sclgme.org