Do Dubai SMEs have to budget more for rent?

Posted on Sun Dec 22 2013

SMEs in Dubai may have to budget more for their office rent next year as a new decree on rental caps comes into effect.

Landlords will be allowed to increase the rent of a property if its rental value is 10% below the market rate, as opposed to 25% previously, according to the decree passed by His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai. However, they will not be permitted to raise rent if the current rate is less than 10% below the market rate, bringing some relief to SMEs from unwarranted rent hikes.

The decree also puts a cap on the percentage of rent increase to avoid uncontrolled hikes by landlords. The rent can be increased by:
- 5% if the rental value is 11%-20% below market rate
- 10% if the rental value is 31%-40% below market rate
- a maximum of 20% if the rental value is 40% below the market rate

The decree is applicable to landlords from the public and private sectors, including private development areas and free zones, according to the Emirates News Agency (WAM).

In an earlier interview with SMEinfo, Ranjeet Chavan, director at real estate agency SPF Realty, had said that the rent for commercial properties was expected to grow by 8%-10%: “From the beginning of this year, there has been a growth in office rentals and the pricing overall, and there are no vacancies which means people are accepting the current price levels. As long as it has been adopted, I believe it is a healthy increase. Any increase that people don’t adopt and the market doesn’t adapt to, is not right.”

What is the maximum increase in rent you can accept for your SME? Please share your views below.

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