Dubai IT traders welcome new rent regulations

Computer resellers on Dubai’s Khalid Bin Waleed Street have expressed their relief at the recent government decision to cap future rent hikes at 7%. Soaring rental costs have been a major concern for resellers over the past few years with double digit increases coming against a backdrop of falling margins.

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By  Andrew Seymour Published  January 23, 2007

Computer resellers on Dubai’s Khalid Bin Waleed Street have expressed their relief at the recent government decision to cap future rent hikes at 7%. Soaring rental costs have been a major concern for resellers over the past few years with double-digit increases coming against a backdrop of falling product margins. The Dubai authorities confirmed news of the cap — which previously stood at 15% — last month, putting resellers in a stronger position to be able to forecast their costs for the year ahead. “In any business you need to be able to budget, and I’ve had no clue as to what I can spend,” said Rakesh Bohra, general manager at the Wi-Fi Computer Zone. “It doesn’t just go up for you directly — the increase in rent has a knock-on effect. In order for a food vendor to make money he has to increase his price, the shopkeeper who is selling the raw materials will increase costs, and the one who’s supplying to the shopkeepers will increase his costs.” He added: “A 7% rent rise is putting us down by 15% already and at 15% it was exponentially higher — up to 40%. When it was 15%, it was very hard for all of us, but at 7% we will all be able to manage and our employees will be able to take care of themselves.” The scale of rent increases has been a major issue for Dubai-based IT resellers and retailers in recent times. Most have had little choice but to accept the double digit hikes imposed by their landlords because moving to an alternative location would not make commercial sense. One reseller with a prime road-facing position on Khalid Bin Waleed Street claimed his annual rent had rocketed from AED240,000 (US$65,000) to AED490,000 (US$133,000) in the space of just three years, and admitted that the costs had eaten into his bottom line. “A fixed cost is everything to your profit,” he admitted. “Margins are slimming anyway and guys with big overheads like us now have more responsibility to look at margins and figure out a way to keep afloat.” Rajesh Keshwani, director at reseller Tiger General Trading — which also produces the LightWave accessories brand — said: “It has been very tough recently so the cap has come as a breath of fresh air for most dealers. Unless a reseller was financially very strong and good at managing cash flow it was very difficult to survive. 99% of dealers take a lease out on premises and the increase in rent must have accumulated to about 50% to 80% over the last three years.”

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