Abu Dhabi: The municipality fee is being collected from residents who are staying in rented houses, which will create the perfect storm in raising on the cost of living in Abu Dhabi, with the following hikes in water and electricity tariffs as well as fuel subsidy cuts.
Analysts say that the fee, amounting to 3 per cent of a tenant’s annual rent, is likely to push down consumer spending in Abu Dhabi, especially amid a backdrop of uncertainty in the economic environment and job cuts across many industries.
Abu Dhabi has recently reinstituted a five percent rental cap, the municipality fee will have an impact on people’s spending levels, and for others the municipality fee might set them over the edge and they might start considering whether they can afford to be in the city or not. It seems to be that only 3 percent has been increased, but it will certainly effect to get people’ back up.
The Head of research and consulting at CBRE Middle East Matt Green said, “We have quite a similar municipal fee in Dubai, and I do not think that it is off-putting for the market … so I am not sure if it is sufficient to have a particularly negative impact on the property market,”
Mr. Green also pointed that Dubai has a similar municipality fee, albeit slightly higher at 5 per cent, and that has not been detrimental for investors or tenants.
Edward Carnegy the director and head of consultancy Cluttons Abu Dhabi, agreed with that view, adding that the fee was a necessity for the government in order to increase and diversify its revenue sources.
He also mentioned that, the main challenge with the municipality fee is, the fee is backdated to February 2016, which means the tenants will now have to pay a lump sum this month.
According to a statement made by the municipality on Thursday said, the calculations of the municipal fee will applied from Febuary 2016, not from January 2017, which was the date of issuing Resolution No 13 for 2016 by the Executive Council on tenant contracts.
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