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Decree freezing property rents in Dubai unlikely to have much effect

Sheikh Mohammed bin Rashid Al Maktoum issued the decree to freeze rents in 2009 for tenants who renewed their contracts last year.

Mohammed Ibrahim Al Shaibani, director of the Dubai Ruler's Court, said the decree was aimed at curbing the growing increase in property rents in the emirate and maintaining a balance between the interests of both landlords and tenants.

It states that rents for both residential and commercial units set last year are frozen unless they are more than 25% below the guideline figure recommended in Dubai's new rental index.

However real estate experts claim that thousands of tenants across Dubai could still face steep rental price rises despite the decree and that the rent index is too simple.

They point out that many expatriates who arrived in the emirate before rampant inflation took hold face paying substantially more to renew their leases this year.

'There will be quite a lot of people who will potentially see their rent rise in 2009. Those people could have been in there two, three, four, five years and historically they've kept it down so that they would be in line for increases,' said Andrew Chambers, managing director of real estate consultant Asteco.

There are also concerns about the rental index recently announced and claims it will damage sentiment in an already rapidly cooling market at a time when landlords should be free to charge what they want to stimulate the economy.

Dubai's Real Estate Regulatory Authority is accused of putting out of date price recommendations on the index which is voluntary.

Rera recommends that a one bedroom apartment in the Greens should cost between 110,000 and 130,000 dirhams a year. The price of renting a one bed flat in International City, should be 65,000 to 75,000 dirhams a year, according to the index but a similar property in Jumeirah Beach Residence is put at 110,000-150,000 dirhams a year.

The index suggests a five bedroom villa on the exclusive Palm Jumeirah island should be leased at between 500,000-700,000 dirhams a year. A smaller villa with two bedrooms in the Springs is put at 190,000-230,000 dirhams a year.

'The prices in the rental index are way down on what landlords were getting last year. The market should speak for itself. The prices are out of date and are too simplistic,' said Laura Adams, leasing manager at broker Better Homes.