Starting with Abu Dhabi residents will have to pay a municipality fee starting January this year.
The fee will amount to 3 percent of the annual rent and is being collected starting this month by ADWEA. The charge will be applicable to tenancy contracts in the emirate including Al Ain and in the Western Region. Property owners, however, do not have to pay the fee.
The municipal fee in Abu Dhabi mirrors the 5 percent municipality charge collected in Dubai by the Dubai Electricity and Water Authority and the 2.5 percent fee collected in Sharjah at the time of the rental contract renewal.
The new fee part of several recent hikes
In January 2016, Abu Dhabi hiked water and electricity tariffs, to encourage residents to rationalise their energy consumption. While the water tariff for expats remains unchanged at AED 5.95 for 1,000 liters, those who exceed the daily limit of 700 liters in flats and 5,000 liters in villas will be charged AED 10.55 per 1,000 liters. The figure is an increase from the AED 9.9 rate last year.
How off-putting is this for residents?
- Just recently, the emirate re-instituted a 5 percent rental cap, in order to ease the cost of living for residents. However, reports suggest that the new municipality fee could get people thinking whether they can afford to rent in Abu Dhabi or not.
- Official sources have said that the calculation of the fee will apply – not from January 2017 – but from February 2016. Hence, the main challenge with the fee is that it is backdated to February 2016, implying that tenants will have to pay a lump sum this month.
Will this fee have a negative impact on the Abu Dhabi real estate market?
- Real estate analysts opine that it is insufficient to have a particularly negative impact on the property market and point out that Dubai levies a similar municipality fee, albeit slightly higher at 5 percent, which has not been detrimental for investors or tenants.
- Property experts also say that the fee is a necessity for the government in order to increase and diversify its revenue sources amid a decline in oil prices.
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