Clarification on government efforts to stabilise the housing market

A report has created the incorrect notion that a new property law has been adopted that would effectively put an end to price control protections within the emirate of Abu Dhabi.

The report in The National titled Property law gives landlords power to evict tenants and raise rents (March 11) has created the incorrect notion that a new property law has been adopted that would effectively put an end to price control protections within the emirate of Abu Dhabi. The reality of the situation is that the law Leasing of Places and the Organisation of the Landlord and Tenant Relationships No (20) of 2006 as amended by Law No (6) of 2009 was amended by Law No (4) of 2010 on February 10, 2010 to transfer control and oversight of the current rental dispute resolution mechanism from the Executive Council, where it previously sat, to the Judiciary.

The impetus for this change was the realisation that judicial authorities possessed both a more appropriate skill set and the necessary bandwidth to improve the effectiveness of the dispute resolution mechanism, which was first created by the law. This change does not have any impact on either the price control or protection rights afforded by the law. To be completely accurate, it should be noted that both of the above provisions would have expired on November 1, 2009, but were extended via the issuance of a resolution by the Executive Council on November 8, 2009.

The effect of this resolution was to extend these provisions until November 1, 2010. As such, the current cap on increases in rental rates, as well as the right of tenants to renew their leases, remains unchanged. The main reason for these amendments was to allow the Government to better evaluate the effectiveness of the current system of controls, with the intent to revisit the topic at the end of 2010. In the intervening period, the Chairman of the Executive Council, His Highness Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, has ordered the formation of a specialised ad hoc committee with representation from economic, zoning and planning bodies within the government.

This committee has further retained the services of an internationally recognised real estate consultancy to assist in reviewing the current state of the real estate market and providing the government with a detailed and methodologically sound analysis and possible set of recommendations regarding future actions to ensure the sustainable growth of the real estate sector within the emirate. The Abu Dhabi Government fully appreciates the impact that imbalances within the real estate sector can have on the overall health of the local economy, as well as on individual households.

When supply is too short, spiralling prices can unleash destructive inflationary pressures, and when prices are too low, investment dries up and new supply fails to enter the market, which can paradoxically lead to future price spikes. In adopting and later extending the current price control and protection rights for tenants, which can be further renewed through a resolution of His Highness the Chairman of the Executive Council, the Government is seeking to address a temporary imbalance brought on by unexpectedly high oil prices and economic expansion which had the potential to unleash harmful macroeconomic instability within the local economy.

In moving forward, tenants and landlords should feel assured that the Government will continue to seek to create an outcome that is balanced in terms of protecting the interests of both consumers and suppliers within the real estate sector, with an ultimate objective of achieving a degree of market equilibrium that will obviate the need for government intervention. Dr Ahmed Al Mazrouei is the Deputy Secretary General of the Abu Dhabi Executive Council and Chairman of the Ad Hoc Committee on Rent Controls