29 September, 2006

Of House Rents and Salaries

The tug-of war between house rent (plus other) inflation and salaries would perhaps take a long time to end. The Rent Inflation debate made headlines today in the Gulf News, along with the inadequate salaries in UAE.

The tenancy law amendment by the Ajman Govt. is highly commendable:

The Ajman government yesterday put a 20 per cent cap on rent increases and barred landlords from increasing rents for three years after the initial contract has been signed.”

The rent-freeze for 3 years on a new contract seems to be similar to what we used to have in UAE long ago (I guess at that time it was for 2 years), with the additional benefit of complete cleaning, painting and pest control services given free when the contract was renewed 2nd time! In some cases (esp. if the building was old) the landlord used to give a token reduction of rent (eg Dhs 500) if the additional benefits were not included in the new contract.

While Sharjah Municipality has set up a committee to look into the growing disputes between landlords and tenants over increasing rents, it remains to be seen how our beloved Dubai would ultimately rule this year.

On the salary front, according to this report there has been an overall increase – although it is still inadequate. The Hay Group Middle East study reports that managers and executives have seen their basic pay packets expand by a healthy 8-11 per cent on average, compared to just 4 per cent for middle income earners”

Personally I take this report with a pinch of salt:

1) It’s observed that “the average increase in guaranteed cash levels (basic salary plus cash allowances) at 5.3 per cent from April 2005 to April 2006” - which is compared to UAE’s official inflation rate of 6%. I’d put the differences much wider than quoted!

2) Instead of narrowing, the pay differentials are widening – it’s easy to observe that despite better capabilities salaries set for some nationalities are lower than that of others

3) Though research was based on info from 160 companies, I suspect that the selection is skewed local conglomerates (instead of MNCs and enterprises)

I’m sure community members would have different views…

Image Courtesy: http://www.civicforum.org.uk


archer14 said...

160 companies. I wonder if they're all companies that are like "Al Shit Trading".

Mme Cyn said...

I know of no one who got an 8-11% increase last year. My employer gave us a tiny flat increase this year-- the same amount for everyone -- which ended up being approximately one half of one percent in my case. Over the past couple of years, the increase has been approx 4%, which is less than the local increase in the cost of living. I do not blame my employer. It pays for my housing and has had to deal with the outrageous rent increases in this country. The fact that the budget has not been increased in some time hasn't helped. Still, I'd love to know who is getting those hefty 8-11% raises, 'cuz it sure wasn't me or anyone I know!

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