A Familiar Story About Rent

In 2008, we encountered a taxi driver who approached us seeking to rent an apartment. It was a challenging period for renters due to the soaring rental prices. The government's implementation of the "one villa one family" policy and the planned demolition of a section of Satwa added to the strain on the already limited supply of apartments in Dubai.

Returning to the taxi driver's story, despite having a steady income, he faced great difficulty finding suitable accommodation. We informed him that an apartment would become available in three days. However, with nowhere else to go, the taxi driver shocked us by sleeping in his taxi outside our office for the entire three-day period, just to secure the apartment. This incident highlights the desperation of the situation.

During that time, we frequently had landlords approaching us, requesting us to ask tenants to vacate their apartments at the end of their tenancy contracts. Rental prices were escalating rapidly. In 2008, the Real Estate Regulatory Agency (RERA) introduced new laws governing landlords and tenants. Despite these changes, it was still relatively easy to replace existing tenants with new ones at the prevailing market rents.

Later in 2008, the financial crisis hit, resulting in a significant number of job losses and expatriates returning to their home countries. This created a surplus of available apartments, leading to a decline in rental prices. Landlords became desperate to retain tenants, and rents started to decrease across Dubai. I have included a graph displaying the rental trends in the International City area.

Now, in April 2013, rental prices have begun to rise again. For instance, last year we rented two-bedroom apartments in Uptown Mirdiff for AED 85,000, whereas the current asking rent in Uptown Mirdiff is AED 110,000. This trend is consistent throughout Dubai, with landlords now seeking higher rental incomes.

However, the process is not as straightforward anymore, thanks to RERA. According to Decree 2 of 2011, rent increases are subject to specific circumstances.

"For tenants who leased a property prior to January 10, 2011, if the rent paid in the previous year was not higher than the 'average similar rent' and not lower than 75% of the average similar rent, the rent cannot be increased in 2011. This is stipulated in Article 1 of the Decree."

Rent can be increased under the following circumstances:

1. If the rent was 26% to 35% lower than the average similar rent, the maximum rent increase is 5%.
2. If the rent was 36% to 45% lower than the average similar rent, the maximum rent increase is 10%.
3. If the rent was 46% to 55% lower than the average similar rent, the maximum rent increase is 15%.
4. If the rent was less than 56% of the average similar rent, the maximum rent increase is 20%.

The rental index is determined by RERA.