Expat rent surcharge will push up the price of renting in Abu Dhabi

by Ray Clancy on April 15, 2016

Expats in the Gulf state of Abu Dhabi facing having to pay a 3% surcharge on rental property with the introduction of a new municipality contract fee.

Officials said that the new charge will be collected with monthly electricity and water bills, and will add about Dh5,000 to the cost of renting an average two bedroom apartment.

It is likely to cause a debate with it already being criticised as discriminatory as United Arab Emirate citizens will be exempt from the fee. But there is a similar fee in neighbouring Dubai which comes out closer to 5%.

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The decision to levy the new fee was published in February’s Official Gazette but it does not give a date when it will be collected for the first time.

Declan McNaughton, UAE managing director of the property consultancy Chestertons, said the charge was another expense at a time when many residents were already complaining about the cost of living.

He believes that some landlords may absorb the extra fee but it will certainly become a bargaining points when tenants renew their leases or take on new ones.

The reaction to the new fee will be monitored closely, according to Dr Abdulla Al Bloushi, head of land and property management in Abu Dhabi. He believes that if enough people complain about it then it could be reviewed in the future.

The rental contract fee follows the introduction of a new levy of 4% on the price of hotel stays, announced earlier this week.

The new fees are part of an attempt by governments in the Gulf Region to find new sources of revenue in the light of the slump in oil prices. Many are considering introducing new taxes such as VAT on food and clothes.

All of these moves will make it more expensive to live in the region. It could be a blow to expats who have lower earnings. Expats point out that salaries in Abu Dhabi have come down, and many of the allowances that used to be included in expat packages are no longer available.

Accommodation, automobiles and schooling are generally regarded as affordable, as is food, clothing and entertainment. But housing is a major expense and many expats spend almost 50% of their salary on accommodation.

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