Tenants and homeowners say the new tax added on to utility bills next year will further hit their household budgets after recent hikes in some emirates.
From January 1, the 5 per cent value added tax (VAT) will come into effect and be added to a range of products services. A breakdown released on Wednesday for the first time confirmed it would affect including food, clothes and utilities.
Families in large villas, in Sharjah and Ajman in particular, have already seen their bills double in recent months.
“My total bill every month ranges between Dh2,000-2,500 as I live in a villa, but I was shocked when I received a bill of Dh5,276 for September. I am afraid the next month bill will be either the same or even higher,” said Aida Salem, 40, a resident of Ajman.
“Such unusually huge utility bills add much more burden to our already rising expenses,” said the mother of two daughters.
Mrs Salem said that “if this is the way now, what we would do when VAT comes in".
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VAT in UAE
Water and electricity bills to be subject to 5%
UAE consumers to bear some of VAT burden on food
Tax in the UAE: Everything you need to know about VAT and a little bit more
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Sharjah and Ajman's utility companies encourage residents to use AC sensibly, including shutting it off when not at home. They also suggest installing new, modern bulbs and conserving water.
Younis Mohammed, another Ajman resident and a father of three children, has received bills of about Dh1,000 to Dh1,800 for the past six months.
Until then, he used to pay an average bill of Dh800, while Ali Kamal, a Lebanese resident in the Al Taawun area of Sharjah, said: “I always pay between Dh500-600 for a monthly bill. But I have paid Dh1,036 this month; almost double the amount I have been paying since I have lived in a one-bedroom apartment in two years ago.”
“It is not only me, most tenants in my building received inflated bills,” he added. We already pay high rents plus the annual attestation charges for tenancy contract, which increased from 2 per cent to 4 per cent from last year,” he added.
Mr Kamal was surprised that his power was disconnected on November 8, 2017.
“I visited a Sewa office to ask why they disconnected electricity in my apartment, as they only disconnect the power for those whose bills exceed Dh1,000. I found out that my one month bill is more than a thousand in only a month. Although my wife and I outside the apartment for at least 10 hours, as we are working. Also, we rationalise our power consumption by switching off lights and air conditioners most of the time,” said Mr Kamal.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Four-day collections of TOH
Day Indian Rs (Dh)
Thursday 500.75 million (25.23m)
Friday 280.25m (14.12m)
Saturday 220.75m (11.21m)
Sunday 170.25m (8.58m)
Total 1.19bn (59.15m)
(Figures in millions, approximate)
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The specs
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Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
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MATCH INFO
Manchester United 6 (McTominay 2', 3'; Fernandes 20', 70' pen; Lindelof 37'; James 65')
Leeds United 2 (Cooper 41'; Dallas 73')
Man of the match: Scott McTominay (Manchester United)
About Tenderd
Started: May 2018
Founder: Arjun Mohan
Based: Dubai
Size: 23 employees
Funding: Raised $5.8m in a seed fund round in December 2018. Backers include Y Combinator, Beco Capital, Venturesouq, Paul Graham, Peter Thiel, Paul Buchheit, Justin Mateen, Matt Mickiewicz, SOMA, Dynamo and Global Founders Capital
