Housing ‘fee’ rage

If there is one topic in Dubai guaranteed to send me into fits of rage, it is that of the ‘Housing Fee’.

The ‘housing fee’ is a tax imposed by the Municipality, charged annually at 5% of the value of a rental contract, or 0.05% of your sales contract value, paid at monthly intervals over the year.

It is positioned as being a ‘fee’ to cover local services such as rubbish collection and maintenance.

Fair enough – the Municipality is completely within its rights to charge whatever it wishes and, if we don’t like it, there are plenty of people on various Dubai forums who will offer to help us pack our bags and drive us to the nearest airport.

Unfortunately, the ‘fee’ has various issues, which I am sure the authorities will work out in due course.

Firstly, it’s not really a ‘fee’ – it’s a tax. It’s not based on real usage of services, it’s based on property ownership or rental and bears no relation to who actually uses what or how many people reside in the property concerned.

It’s also not really related to local services. I live in a private development and pay eye-wateringly high service fees to the developer to handle local services. It’s also extremely high – far higher than council tax rates in London, for example.

This might all sound like semantics, but it’s important – if you want people to get on board with paying for stuff, then at least call it what it is. It drives me crazy having to pay a ‘fee’ for something I already pay someone else to do. Just be straightforward and call it a Municipality Tax. Everyone benefits from what is, in general, excellent local infrastructure for the region and someone has to pay for that. Don’t dress it up as being about rubbish collection and garden maintenance, when the majority of ‘new Dubai’ already forks out a fortune to Emaar, Nakheel and other developments for these services.

It’s also calculated on a very odd basis for those people who own their own properties – people have paid varying amounts for similar properties which might be occupied by several people or by no-one, with each property paying a varying sum in tax.

It is also not collected or even charged evenly. It is supposed to be added to your utility bill each month and transferred to the Municipality.

Take my example. I was surprised to see 721Dhs added to my monthly DEWA bill when I moved in to my apartment three years ago. After ringing up various departments it became clear that there was no way I could get out of it. I had been automatically signed up to pay it when registering to get my water and electricity. Fair enough.

It took two and a half years, however, for the amount I was paying via my utility bill to stop simply being a credit and actually get transferred to the Municipality – during that time I was effectively paying the tax, but the Municipality wasn’t getting the money.

When we moved into our apartment, there was a period when its value reached three times what I paid for it. Other people in the building bought their apartments during that time and moved in – that means they are still paying three times what I am paying for their housing tax. Three times what I pay works out at $588 for a two bedroom apartment, per month, on top of around $10,000 per year in Emaar service fees. Ouch.

Most infuriating of all, around 50% to 60% of the people I know pay nothing whatsoever at all – nothing! I have paid 26,000Dhs ($7,000) over the last three years for my apartment. Most of my friends have not paid anything. Good for them, but hardly just.

The requirement to pay the housing tax has supposedly been around since 1962 and DEWA, the utility company, have everyone’s rental or property ownership contracts registered, so there’s no reason why the tax can’t be applied. It seems that they are taking a phased approach to charging it. I can understand that from a logistical and practical point of view, but it is still extremely unfair – why should some people pay and others not?

The phased and logistical approach also seems to be completely random. I assumed that since I was signed up to pay when I first registered with DEWA that all new registrations were being hooked up with to pay the tax. Not so. A good friend of ours who moved into his apartment about a year after us has just told me that he has paid nothing at all.

Recent announcements in the press suggest that moves are afoot to implement the tax for everyone and to link the amount for property owners to an average rental price for the area, as opposed to a percentage of the sales contract. Linking the tax to rental price is definitely a good move – I just feel sorry for people who’ve paid through the nose for years because they bought at the height of the boom. Even though we bought at a good time, it should also mean we pay less than we have been.

Even if they do get everyone signed up and paying by January 1, I still feel the amount charged is way too high.

As for the situation today… You have some people paying and some not. Of those who are paying, the tax isn’t being collected properly for everyone, as it’s sitting as a credit on the utility bill and not being transferred. Some people are paying way more than others for the same sized property. Those people in private developments whose service fees cover the services the tax is supposed to pay for are paying way more in tax for something they don’t use than people in areas actually served by the Municipality.

It’s possible to find a block of flats with similar properties filled with people paying nothing, people paying differing amounts and people paying the tax but the Municipality not getting the money.

I am sure the appropriate authorities are working on a wise and progressive solution to these problems and that everything will be sorted soon. I wonder, though, if I will be due a refund for paying too much or for paying for so long when others paid nothing? I’m not holding my breath.

For the sake of my sanity, this has to get sorted soon…

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5 Responses to “Housing ‘fee’ rage”

  1. Basil Says:

    “The ‘housing fee’ …charged annually at 5% of the value of a rental contract, or 0.05% of your sales contract value”

    Small correction here: If you own your property, Municipality assumes that the rental value of your property is 10% of sales contract value, and then they charge you 5% of that…
    SO: It’s 0.5% of your sales contract value

  2. Aaron Says:

    This changes as of Jan 1st 2011 to 5% of the RERA Rental Index for the property and area you live in. Pretty good for me as rents in Dubai Marina appeared have dived quicker than an Italian center forward recently:

    http://gulfnews.com/business/property/uae/dubai-marina-remains-hot-favourite-for-renters-and-buyers-1.672066

    The plus for this is that is corrects the boom/bust in property prices and brings a much better equality to all. Rather than fixing it a notional value of what your property might have been worth for a few months three years ago.

  3. Jens Says:

    At the end of the day, you can call it what you want; tax, fee whatever. Dubai is basically bankrupt and needs money from anywhere. Housing fees, police fines, parking tickets (I just paid 200dhs for “obstructing traffic” on a piece of sand), doesn’t matter, as long as it pays into Dubai’s coffers. Emaar, Nakheel et al of course need their own payments into their coffers too.

    Stop looking for sanity in this. There’s none.

  4. Nuppo Says:

    I am with Jens on this one. Although I applaud your well structured approach.

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