Abu Dhabi introduces three per cent municipality charge on households

A 3 per cent municipality charge based on the value of rental contracts will soon be added to customers' electricity and water bills.

The municipality fee is now being applied to Abu Dhabi residents. Ravindranath K / The National

ABU DHABI // The new municipality fee payable by every expatriate tenant in Abu Dhabi is to be backdated to February last year.

The fee, equivalent to 3 per cent of a tenant's annual rent, has begun appearing in water and electricity bills from Abu Dhabi Distribution Company.​

The backdating to last February, when the fee became law after its publication in the Official Gazette, means tenants face a double blow: they will pay not just for this year, but for 11 months of last year.

In addition, the portion of the fee from last year is payable as a single lump sum, rather than monthly. Abu Dhabi Distribution Company is referring queries from worried tenants to Abu Dhabi Municipality.

“With the tough market conditions and rising household costs, this will be an added pressure on every tenant, as it needs to be factored in by every household,” said Hitesh Raigaga, a senior analyst at the property agents Chestertons.

“Increased costs and tighter wage increases mean households will have comparatively lower spending capacity.”

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Abu Dhabi municipality tax

The new municipality fee payable by every expatriate tenant in Abu Dhabi has begun appearing in water and electricity bills from Abu Dhabi Distribution Company. Delores Johnson / The National

■ Non-payment of municipality fees risks disconnection of utilities, legal charges

■ Homeowners off the hook for Abu Dhabi's three per cent municipality fee

■ Q&A: What Abu Dhabi's 3 per cent municipality fee means for you

■ Editorial: Abu Dhabi's municipal fees will help build the economy

■ Abu Dhabi introduces 3% municipal fee on expat home rentals

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Residential rents in Abu Dhabi fell by about 5 per cent last year as job cuts in the energy and banking sectors weakened demand, especially at the premium end of the market.

But Andrew Covill, a director of property brokers Henry Wiltshire, said he did not expect that most people in the mid-income housing sector would be able to negotiate discounts.

“The upper end of the market is definitely down – the big villas on Saadiyat and big apartments in Al Raha Beach. But the one and two-bed apartments haven’t changed.

“I honestly don’t see it. We get a lot of people who come to us because their rental contract is due for renewal and they look around, make some low offers, people don’t accept them and they end up staying where they are.

“These magic cheap places that everyone seems to think they can get simply aren’t there.”

Mr Raigaga, however, said landlords should brace themselves for more requests from tenants for discounted rents when contracts come up for renewal.

“Due to the continued cost cutting and downsizing in the oil and government sectors, we’ve witnessed increasing economic uncertainty, job cuts and, in many cases, a drop in allowances, forcing residents to seek cheaper and smaller options. So landlords should not be completely surprised by rent discount negotiations.”

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