Emirates landlords holding markets to ransom

When Zayid al Jaafari, an Omani national, was named the grand prize winner in a contest held this summer by Union National Bank, he picked up perhaps the most highly desired commodity in Abu Dhabi. Instead of a luxury sport car or an all expenses paid holiday, he won a roof over his head - a one-bedroom apartment in a city where finding accommodation at an affordable price is becoming nearly impossible.

At the root of the housing crisis are the simple economic factors of supply and demand. With an estimated 99 per cent of rentable residential units occupied, landlords can hold the market to ransom, knowing that house hunters have no option but to give in to ever growing demands. Unsurprisingly, Mr Jaafari said he would happily accept the apartment, stating: "It suits the growing needs of my family perfectly." Others have not been so fortunate.

Ishtpal Ahuja, a civil engineer from India, described his house-hunting experience as "like hell"; one plagued by unaffordable rents, a poor choice of quality homes and less than honest tactics from the estate agent. Knowing that the Dh700 (US$190) a day he was paying to stay in a hotel was beyond his budget, he began looking for a one-bedroom apartment. After scouring the local property ads, he found three suitable homes, one of which - a property on Hamdan Street - seemed ideal at Dh85,000 a year. He reluctantly paid the estate agent a Dh100 "inspection fee" and agreed to a 5 per cent commission if he accepted any of the offers.

"The estate agent took me to one apartment near El Dorado cinema instead of Hamdan Street, but the flat was so dirty that I couldn't even explain it to you," he said. "He even told me that he didn't have the key for the flat, so he showed me another in which about 10 Filipinos were living, and they had put up temporary cloth partitions inside the apartment."

Badly shaken by the realisation that his planned budget was wildly off the mark, he demanded to see more suitable apartments. The agent then proceeded to tell him to come back when he was willing to pay more than Dh135,000. After searching for nine more months, Mr Ahuja, 23, decided to reveal his predicament to his employer. The company eventually secured him accommodation last summer in Khalidiya Towers, where he currently resides. His experience is shared by thousands of others who arrive in the city with a set budget, expectations for safe, clean housing and a desired neighbourhood in mind, only to find that they are disappointed in each category.

"You basically have to move very quickly. If you see something at 10 o'clock in the morning, by five past 10 that same morning you'd better make a decision about whether you want that apartment or not. There is no time to wait and see," said Ian Albert, the regional director for Colliers International, a real estate consultancy. "You have to do absolutely everything you can, which is to use your estate agent, see the watchmen, check availability at the buildings you like, whatever is appropriate to try to find accommodation."

Many expatriates pinpoint the Khalidiya, Manasir and Corniche areas as their first choices, but there is "next to nothing available there", said Rebekah Savage, who works for Foundation Property Management, an Abu Dhabi-based company. "If you're lucky and something gets turned over by the landlord, you're looking at waiting two or three months," she said.

Andrea Menown, the leasing manager of LLJ Property, said reputable agents would fan out from the city centre block by block until they found something suitable for their clients. The keys to finding a home are time and perseverance, she said - luxuries few new arrivals have.

The annual rent for two-bedroom flats on the Corniche and in Khalidiya - highly desirable areas - ranges from Dh235,000 (US$64,000) to Dh250,000, depending on the quality of the unit, according to a study published last month by Asteco, a UAE-based property services company. Rents in more "affordable" areas start at Dh120,000 for a two-bedroom flat in Musaffah to about Dh225,000 for similar sized accommodation in Hamdan Street, Airport Road, Khalifa Street and Salam Street. Expect to pay slightly less for units on Passport Road and in the Muroor Area.

Year-on-year rental increases have risen by 65 per cent, the largest annual surge since 2001, according to fourth-quarter data released by Colliers. The average cost of renting a home in the capital is now similar to the costs in central areas of London and New York. A search on the website of the UK estate agent Foxtons showed two-bedroom flats in the fashionable districts of Kensington or Notting Hill were fetching about £2,200 a month, or Dh149,856 a year. But unlike the situation in most countries, tenants in the UAE are often required to pay their entire year's rent as a lump sum. Most are forced to secure a loan or put the contract in the hands of their employer, which can lead to friction over clauses in the deal. There are signs, however, that the growing availability of accommodation in Dubai is forcing some landlords to accept payment on a tri-annual or quarterly basis.

Landlords who still demand one cheque up front are pushing their luck, estate agents say. While the financial crisis has tempered prices for outright property sales, a lack of supply and ever increasing demand from expatriates is continuing to pile pressure on the rental market. Andrew Chambers, the managing director at Asteco, said rents were unlikely to stabilise in the next year. "Only a bigger supply of accommodation would keep rates under control," he said.

While as many as 140,000 new residential units are planned for the city between 2011 and 2013, only 30,000 will be delivered by the end of 2010, and that is not soon enough to help the thousands of people arriving in Abu Dhabi each month in need of living quarters.

The Abu Dhabi Chamber of Commerce and Industry estimated in October that there were 28,000 too few homes in the city - a figure expected to rise to 70,000 by 2010. One option available to residents is looking in the suburbs that line the Abu Dhabi to Dubai motorway, towns such as Shahama and Al Rahba. Other towns experiencing a growing influx of expatriate professionals include Al Falah and Shamkha, which are about 40km beyond Abu Dhabi on the motorway to Sweihan.

Vera Zikic, from the former Yugoslavia, who works in the transportation sector in Abu Dhabi, pays about Dh50,000 a year to rent a 125 square metre building in Shamkha, which she shares with her two teenage children. The home was once used as a majlis for the adjacent villa. But life on the outskirts has its drawbacks. Located tens of kilometres from hospitals, supermarkets, and petrol stations, residents living in Shamkha, Shahama and Al Falah, including Mrs Zikic, say services and basic amenities in these towns are seriously lacking. Dubai and Al Ain are also fast becoming alternatives to the capital, as the realisation grows that the three-hour commute to Abu Dhabi and back is easier to bear than the financial pain of living in the capital.

The housing shortage is also less severe in Dubai, where the delivery of sprawling projects is giving new arrivals plenty to choose from, although still at high rents. The average rent for a two-bedroom flat in Dubai usually does not exceed Dh200,000, apart from in luxury communities such as Palm Jumeirah and Downtown Burj Dubai, Asteco stated in its report. Rents climbed 22 per cent on average in the 12 months to October, according to Colliers. Abu Dhabi does have its affordable housing projects, such as Mohammed Bin Zayed City, but the number of units falls short of demand.

Aware that their recruitment targets are at stake, local companies have been forced to act as landlords, renting out entire tower blocks and subleasing them to their employees. For those with no choice but to go it alone, however, the experience can be utterly exasperating. In the words of one successful flat finder, the best things you can do are ask all your friends if they know of any vacancies, hire a reputable broker and be patient.

Protection With so much pressure on the rental market, some landlords cannot resist the temptation to increase rates well over the legal rent cap. But tenants have more protection than they think. If the rental contract is for a period of three years or less, the landlord can increase the rental rate annually by five per cent. However, a resolution from the chairman of the Executive Council can increase or decrease this percentage if it is deemed appropriate.

Rent increase The annual rent increase for contracts of more than three years is set by the Executive Council. If a landlord plans to increase the rent, he must inform the tenant in writing at least three months before the contract expires.

Subleasing The tenant cannot sublease a unit without written approval from the landlord.

Maintenance If the landlord does not fix a serious maintenance problem after being notified, the tenant can get permission from the rent committee to deduct the cost of the work from the rent.

Eviction The landlord can evict a tenant if any of seven conditions are met. These include: the tenant defaulting on his rental payments, subleasing the unit without approval, housing too many people, using the home for purposes other than those intended in the lease, and using the premises in a manner that is "harmful to health or hygiene". The owner can also evict a tenant if he wants to demolish the building, but it has to be at least 15 years old and he will require official approval. The tenant must be given six months' notice before being forced to leave the building, and will be given priority in leasing the reconstructed building. The owner will be penalised if he subsequently makes no changes to the building. The owner can also evict a tenant if he wants to live in the unit, providing he has no other suitable accommodation in the same area. The tenant must be given six months' notice before the contract expires and the owner must occupy the unit for at least one year without interruption. If the owner fails to occupy the unit within three months of the tenant vacating and does not provide a reasonable excuse, or if he leases the unit to a new tenant, the rent committee will allow the previous tenant to reoccupy the unit and will penalise the owner.

If you are a tenant or landlord in Abu Dhabi and have a complaint about a rental issue, you must go in person to the rent committee, which is on the corner of Airport Road and Delma Street. There are two options:

1. Depositing rent with the rent committee If a landlord has increased your rent above the legal cap, you as the tenant can deposit the legal annual rent with the rent committee until your complaint can be heard. The landlord can only take possession of the payment after approval from the committee. The tenant must provide several documents, including copies of the rental contract, a passport and a residence visa. He must also explain why he wants to deposit the rent rather than paying the landlord directly. The fee for this process is Dh300.

2. Opening a case before a judge Tenants with a complaint other than simply an illegal rent increase can take their case before a judge. They must provide their own details, those of the opposing party and details of the rental contract and the housing unit in question. They must explain in writing the nature of the complaint and how they think the situation should be resolved. The court fee is 4 per cent of the annual rental rate. On average, a case takes four months to be resolved. rditcham@thenational.ae