Wednesday, January 10, 2007

Is Dubai Rent Cap of 7% A Great Offer?

Dubai, the city of rising prices, traffic jams, overworked people, poor public transportation, supposedly no taxes and rapid growth surprised its residents by putting a rent cap of maximum 7% increase on the annual rents in 2007.

In a city where rentals have shot by 40% to 50% in the past three years, this looks like a New Year gift. But I beg to differ with my fellow Dubai residents stand that it is a great offer. Point is that it has come in after rents have already gone up substantially. Ever since Dubai announced it’s free hold properties in 2003 rents have only been moving northwards. Not many know that more than 40-45% of Dubai residents pay half their monthly incomes for house rents. Such figures might apply only to top cities in America, Europe and Japan. After all Dubai has still not scaled to those heights in terms of economy, purchasing power or per capita income. The earning levels of the average man on the street are nowhere close to the per capita of the most advanced countries. Suffice to say that the UAE is a rapidly growing country but does not justify such astronomical rents. Rising rents have put Inflation levels well over 10%, the highest among GCC countries. The rent cap of 7% is expected to bring relief to the middle-class; but the middle-class is already squeezed to the maximum! Personally my land lord was kind enough to raise my annual rent by only 8% for the last two years. So the rent cap is not going to benefit me!

If rent cap was a gift then movie tickets have become dearer. Beginning January ’07 movie tickets will now cost AED 35 instead of AED 30. I; for one; thought AED 30 itself was higher. AED 20 would be reasonable. Movie operators contend that prices have not gone up in the past many years. But they must realize that movie tickets don’t move up every two years in any part of the world. They further say that tickets are still cheaper than in Europe or America. But I say: Is the average earning on par with the earnings in Europe or America? All that I will say is that this will give a boost to DVD hiring and sale of the new breed of LCD and Plasma televisions. Homes will become even better theatres with increased sales of home theater systems, flat panel TV’s and DVD’s. Bottom line is that some one watching three movies a month will now watch two!

Dubai is certainly becoming expensive with every passing day. Nothing comes free in Dubai. And unlike its neighboring city Abu Dhabi; Dubai is not oil rich. The Govt. needs billions to complete the projects that it has envisaged; many of which I have written on this blog. Where else will it get the money from? Where else can the Government get the finances for its umpteen ambitious projects?

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