Ever since the plans have been announced no two analysts have been able to agree on what the fall out effects of the initiative will be.
On the one hand, opponents of the scheme say that it will be used by landlords to increase rental prices, good news for those who own residential property in the emirate.
On the other, proponents laud the price transparency that will effectively be enforced across the board.
‘The index is a guideline for the tenant and the landlord,’ said Rera chief executive Marwan bin Galita. ‘We are looking at a lot of factors, it is a guide for new people coming to Dubai’.
The figures being collated are across a range of apartments and villas. The data collected will include factors such as the number of bedrooms, the amenities included in the development and the square footage, with samples from each of Dubai’s communities.
The final list is expected to be the most comprehensive such survey to be carried out in the emirate.
It is not yet clear exactly when the figures will be released. Data collection started at the beginning of the year, but the final figures are not expected to be released until the year’s end or the beginning of 2009.
By this time, following the current upward trend of average rents, prices could have risen by as much as 30% in some of the more desirable locations – including the disparity between properties coming online at different phases of areas such as Dubai Marina or Emirates Hills developments.
By 2009 all properties coming onto the market, including all new commercial and residential contracts for existing developments, will be incorporated into the index of rental agreements in Dubai.
Once in place the data will be updated on an annual basis, accounting for fluctuations brought on by the increase in available units and the effects of inflationary pressures (the UAE rate could hit 12% in 2008, according to Merrill Lynch figures).
The idea is that landlords will be able to set the contracts to an appropriate level for the type of property and the area in which it is located.
Currently rents can vary widely, depending on when the resident first signed the tenancy agreement. This is partly thanks to the rent cap brought in by the government to stem tenant complaints of annual cost jumps. Originally set at 15% when introduced in 2006, it was lowered to 7% in 2007 before being finally fixed at a maximum 5% in 2008.
But these caps only affect landlords whose property is already tenanted. New contracts can be set at the market rate, meaning that the disparity between rental returns on similar properties in the same development can be huge.
According to Better Homes figures, rents for apartments in Dubai Marina can vary from Dhs45,000 to Dhs450,000 per year (giving a median of Dhs137,441). On the Palm Jumeirah the figures range between Dhs110,000 to Dhs300,000 (Dhs195,000 average).
Rental prices for villas also vary widely. The Arabian Ranches can be from Dhs140,000 to Dhs700,000 (Dhs316,512 average), while in The Meadows development the range is between Dhs310,000 and Dhs500,000 (Dhs377,000 average).
Landlords are unlikely to lower rents that are above the index average, but what is unclear is whether property owners who are currently receiving less than the annual average will be able to raise their prices to meet the bar.
‘The law states that rent can only increase by 5%,’ Bin Galita told the press. ‘It would be a long process for a landlord to ask for a property to increase to the market value and they might not be successful.’
Despite these assurances the index figures would be a primary benchmark in any case between landlords and tenants that was brought before the deciding rent committee.
One group for whom the index is undisputed good news are newly arrived expatriates looking to rent out residential units. With set transparent price guidelines for each area it will now be much easier to verify that the rent being charged is not excessive as compared to market value, and end the current confusion. With the continuing bottleneck of finished units on the market however, this may be scant consolation as the prices continue their rampant upward surges.