Dubai moves to calm soaring rental prices

By Saifur Rahman, Business News Editor
Published: August 22, 2007, 00:13

Dubai: The emirate will soon facilitate lands to develop low-cost housing for Dubai's middle class to tackle the current housing shortage and tame rent-related inflation, a top government official said on Tuesday.

Marwan Bin Galita, chief executive of the newly formed Real Estate Regulatory Agency (Rera), told Gulf News in an interview the agency was all set to finalise a three- to five-year tenancy agreement so that the tenants can tackle the rising rental costs.

"It will be a model tenancy agreement in which all the rights and privileges of the tenants will be reserved. We will ensure that everyone strictly adhere to the contracts," he said.

"The long term contracts will be transparent and fix the rents for that period and help the tenants in coping with rising rental costs."

However, these contracts may not be mandatory, but to help the consumers, he said. "We do not want to police the market, rather allow the market forces to reshape in a more professional manner. We will try to enforce this," he said.

Experts say a big part of the problem is that the demand for housing in the emirate remains significantly larger than what is available in the market.

Project delays have deprived the market of 300,000 housing units, according to Syed Ali Anwar, chief executive officer of 3D Venture Real Estate.

"These projects have been delayed by at least one year and will only be ready by December 2009. Some are facing construction delays because of rising material costs, others never got started after being announced," he said.

"The current demand is for 100,000 apartments but we include the number of people who will be coming to Dubai by 2009, then we will require 200,000 more units."

The continued economic growth means demand for housing units will continue to remain strong, says Bermak Besharaty, chief executive officer of Al Mas Capital, a company advising on real estate finance deals.

"There was some overbuilding in the luxury sector. There was not enough building in the middle and lower income segments. More developers are realising this."

To counter that, Rera is developing a comprehensive Real Estate Index to assess the market and make recommendations to the government on proposed regulations, said Bin Galita.

"We have began collecting data on the housing supplies and projected demand to complete the assessment which should be completed by the end of this year," he said.

Based on data, he said, Rera will make a set of recommendations to the Dubai government in which facilitating the low-cost housing would figure prominently.

"Dubai definitely needs to facilitate low-cost housing to support the middle class like any other cities and we will definitely recommend measures to facilitate this," he said.

"Already, a number of leading developers have come forward to launch low-cost housing schemes that will help tame the demand." Bin Galita also stressed that Dubai was in need for a property arbitration centre, he said.

"Although the number of rent disputes will reduce drastically once the long-term tenancy comes into effect, the time is right for Dubai to set up a property arbitration centre," he added. "The rent committee may not be enough to tackle everything."