A step in the wrong direction
By Duraid Al Baik, Foreign Editor
Published: September 08, 2007, 23:14
Do we need a law to regulate the real estate market and harmonise relations among different parties, including tenants, landlords and the civic authorities in Dubai? Yes. We need it and we need it badly. The law has become crucial for sustaining a sector that has grown in the past five years to an extent that it has become very powerful and is now influencing other economic sectors.
The second legitimate question is: Do we need a law that increases red tape and creates more bureaucracy at the expense of genuine and productive activities? The answer is a big NO. We definitely don't need regulations that will add to our burden as we already have more than we can carry.
Debate
But how do you strike a balance between getting a law that satisfies our needs and ensuring minimum bureaucracy? This is the big question that warrants a debate.
The news that was leaked from the newly established section at the Dubai Land Department, the Real Estate Regulatory Authority (Rera),is a bit disturbing because the suggestion is that a civil government department is trying to expand its policing authorities over a free market and to generate a little fees, which will be very costly for the economy as a whole.
A law to regulate the real estate market is overdue with the influx of investors from different parts of the world following the issue of the freehold law in 2002. The law that allowed investments to pour into the Dubai market without restriction has enticed investors to buy properties in designated areas. The project was 100 per cent successful because it shaped the new face of the emirate as an investment haven.
Investors have either come here to buy properties to live in them or to lease them to others. A law that will try to curb the right to do so is unacceptable, simply because it is like changing the rules of the game while the game is going on.
To be more precise, Rera has said that it might oblige the owners of freehold properties to seek its permission before renting out their premises from next year. According to Rera, "the move is meant to reduce the abuse of regulations including bypassing the rent cap by landlords".
The question is: What is the role of the Dubai Rental Committee and what are the guidelines that it follows in order to ensure there are no illegal hikes in rent.
It is understood that the market has become more sophisticated than ever before and issues like abrupt termination of tenancy contracts and unfair rent hikes have become very irritating to both tenants and the committee. It is mirrored in the sharp increase in the number of cases handled by the committee in recent years. A swift intervention is required, and that is why the rental cap was ordered.
What is not understood is why should someone be obliged to seek the permission of the Rera or any other authority to rent a flat or a villa for legal residents of Dubai? And, why should he or she be asked to give details on the number of people living in the property. How can this be controlled, if the number of tenants increase or decrease during the course of the contract. I think such issues can be controlled by the regulations of the district and developer of the area instead of a government body.
The innovative management of the real estate market in Dubai in the past 30 years has proved to be the best way of solving conflicts amongst different parties. The creation of a special rental committee to look into all disagreements of tenancy issues has solved the problems of Dubai without a policing authority. The rent increase cap ordered by His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, in 2006 for one year, which was extended for an unlimited period, was another way of solving rent hikes in the market till it stabilises. It is clear that if we have to keep the rules of free market in place, such rent cap will be removed when supply and demand are balanced.
When rents go down, the cap will become ineffective. Regulations other than ones mentioned here, including the rules proposed by Rera, will have a negative effect on the market and the economy. A regulator must look into streamlining issues rather than further complicating them. This has been the main pillar of Dubai's success - and this should never be forgotten.
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