The new municipality charge being levied against rental contracts in Abu Dhabi is likely to boost government revenue by about Dh612 million a year, according to National Bank of Abu Dhabi.
The fee, which will be added as a monthly charge to utility bills, has been introduced as another method for generating revenue to help plug the emirate’s budget deficit, according to a note from the bank.
NBAD’s economists based their figure on the forecast that Abu Dhabi would have 255,000 units on the market by the end of 2016, that they would attract an average rent of Dh100,000 per year, and that 80 per cent would be occupied.
“It is evident that the government is looking for recurring and sustainable revenue streams that will continue to increase steadily over time,” it said in its note. “It seems likely that more such measures will be implemented, across various aspects of the economy, which in aggregate will deliver – in our opinion – not just meaningful but substantial incremental and diversified revenue for the government.”
A new charge on hotel stays has also been introduced.
David Dudley, the head of the property consultancy JLL’s Abu Dhabi office, said that the property market was currently in a “fairly fragile” stage of its cycle.
“Over the past few years, there has been various ways in which the cost of living has increased – increases to rents, to the cost of goods and the reduction of fuel subsidies.
“In the current environment of low oil prices, the government needs to reclaim more money to subsidise municipal costs, so I can understand why they are thinking about it. But adding further to the cost of living could have a detrimental affect on demand,” he said.
Courtesy: The National