Bahrain to introduce new residential tenancy laws
The move should help to further bolster Bahrain's progressive regulatory framework, strengthening the kingdom's appeal to investors.
Bahrain plans to introduce new mandatory tenancy registration procedures for the residential real estate market next month, according to Cluttons, which said the regulations should help to mature the sector.
While the exact process by which the registration of tenancy agreements will take place is yet to be revealed, Cluttons said it hoped Bahrain authorities would learn lessons from elsewhere in the region.
The real estate consultancy firm cautioned that the proposed rent increases at renewal may threaten to obstruct the residential and commercial markets, which have both only recently begun to show increased stability following years of political uncertainty.
But it added that the move should help to further bolster Bahrain's progressive regulatory framework, strengthening the kingdom's appeal to investors.
Faisal Durrani, Cluttons' international research and business development manager, said: "Any move to better regulate the market will be well received by the investment community.
"There are of course a number of lessons to be learned from around the region, which we hope the authorities will consider before finalising the new regulations.
"The most critical component of the regulation should centre on what happens at the time of renewal."
He said the current draft proposal calls for an uplift after a period of two years - 5 percent for the residential market and 7 percent for the commercial market.
He added: "Landlords are expected to be restricted on imposing any rent increases on the agreed rate for two years from the start date of the tenancy, or the date of the last increase. For a market still finding its feet after being impacted by an unprecedented period of national tensions, existing landlords will have to plan further ahead and will be restricted by the rent caps being proposed.
"This will inevitably impact bottom lines should the market outperform the proposed uplifts. At the same time however, it is exceptionally positive to see the authorities move to put landlords' obligations and tenants' rights into clearly defined laws."
According to Cluttons there is no perfect one-size-fits-all solution to this conundrum but it expects Bahrain to follow a similar system to Dubai where rent increases are linked directly to a rent index created by Dubai's Real Estate Regulatory Authority.
Deborah Sellers, head of residential property management at Cluttons Bahrain added: "The move is certainly very positive, however there needs to be greater clarity on the process by which tenancy agreements will be registered. Furthermore, any regulations need to be air tight, with no loop holes for landlords to break lease agreements and implement rent increases in the middle of tenancies.
"The residential market has only recently begun to demonstrate an increased amount of stability as economic growth across Bahrain picks up gradually. And any regulation needs to be carefully implemented so as not to curtail this. With the new proposals however, tenants look like they will end up being the beneficiaries, rather than landlords."