How Are Housing Challenges in AUH Impacting Your Business and Employee Retention?

Greetings,

I think all of us who live and/or work in AUH know the current challenges regarding finding accommodation. I thought we might start a discussion about how this has or may affect your business.

Has your company had to significantly adjust either housing or salary packages to attract candidates? Where are you finding housing? Are you giving a lump sum and expecting the candidate to figure out housing on their own? Does your company provide any mechanisms like interest-free loans from the organization to meet the one-year rent upfront obligation? Is all this affecting recruitment and retention rates? Are many of your employees leaving the island and commuting far distances (i.e., from Dubai, Al Ain, or outlying areas)?

I think many of us would benefit from knowing how the majority of us are coping with this from a people and organizational perspective here in the Capital.

Cheers,
Bruncha

Greetings,

I think all of us who live and/or work in AUH know the current challenges regarding finding accommodation. I thought we might start a discussion about how this has or may affect your business.

Has your company had to significantly adjust either housing or salary packages to attract candidates?

Where are you finding housing?

Are you giving a lump sum and expecting the candidate to figure out housing on their own?

Does your company provide any mechanism like an interest-free loan from the organization to meet the one-year rent upfront obligation?

Is all this affecting recruitment and retention rates?

Are many of your employees leaving the island and commuting long distances? (i.e., from Dubai, Al Ain, or outlying areas).

I think many of us would benefit from knowing how the majority of us are coping with this from a people and organizational perspective here in the Capital.

Cheers,
Bruncha

I waited for sufficient time to see whether we would get any responses here. Here goes my side of the story to our sorrows:

Has your company had to significantly adjust either housing or salary packages to attract candidates?

In the financial year starting in 2007 and onward, it is a reality that real estate/rental prices have increased substantially high in the capital, almost racing neck to neck or ahead of other cities. Accordingly, accommodation allowances had to be revised/re-adjusted for all categories more than one time.

Where are you finding housing?

Right now, it is on a case-by-case basis; wherever there is availability, it is grabbed and ensured. When people exit (mostly we have many 2-3 year contact/rotational staff), those houses/flats/villas are retained for the newcomers. Gradually, the search and reachability have extended all the way from the city to the newly developed mini townships on the way on Airport Road, near Sheikh Zayed Mosque, Khalifa City, or even extensions on Airport and Tariff Road.

Are you giving a lump sum and expecting the candidate to figure out housing on their own?

It again depends on grade, category, and several other factors and contracts. Senior staff/managers are given options of houses/villas already located/finalized whereas in middle management and local contract cases, lump sum payments are given. Some others are given options to find on their own.

Does your company provide any mechanism like an interest-free loan from the organization to meet the one-year rent upfront obligation?

Not really. No loan facility. Based on grades/categories, either options of selecting houses where the rent is paid upfront by the company.

Is all this affecting recruitment and retention rates?

Rental payments eat up a major share of the salary currently. So, obviously, it is a major attraction for employees when they search/opt for new employments. Therefore, it is proving to be a major factor for the above two.

Are many of your employees leaving the island and commuting long distances? (i.e., from Dubai, Al Ain, or outlying areas).

Previously, what was far was Khalidiya, Buteen, Karama, and little ahead, now has become Mussaffah, and even far away up to Shahama, and mini townships on the Tariff highway. Dubai is not at all an option for Abu Dhabi employees, but I have known cases of expats moving to Ras Al Khaimah and driving down daily. I also know many cases of locals who drive down from Ras Al Khaimah or other Emirates. If you notice the early traffic on the Abu Dhabi/Dubai highway, you will realize the scenario more clearly. What was supposed to be an isolated drive in the early morning hours at 6:00 am from Abu Dhabi to Dubai one year ago with one or two cars here and there has become a 4-line almost bumper to bumper drive back and forth to reach offices in Dubai and Abu Dhabi.

I hope I have been able to give you a bit of knowledge and experience in this regard and keep the discussion open for others to share their inputs.

The following articles will also give you a basis to work on your conclusions about what is in store for us:

Team 1 Dubai: Your e-Home for TQM & Positive Thinking: Abu Dhabi outpaces Dubai in housing costs and rentals

In the second link above, experts have estimated an oil price increase in 2008 to $100 per barrel and see the realistic price, which is running now, which has derailed all planning and estimates for belting the escalation of the cost of living to be in line with the affordable remuneration packages that can be offered to employees. It is a global problem and not restricted to Abu Dhabi/UAE alone.

Therefore, it is really a matter of importance now and more in the coming time.

Regards,

Ramesh Menon

At present, there is an acute shortage of quality accommodation, especially in Abu Dhabi, at affordable price ranges. There have been significant increases in rents since last year.

The average rent (June 2006) of a one-bedroom apartment in the capital is Dh53,000, two-bedroom apartments are Dh76,000, and three-bedroom apartments are Dh127,000. From June 2005 to June 2006, rents have increased by 33 percent for single-bedroom apartments, 23 percent for two bedrooms, and 30 percent for three bedrooms (Asteco).

I think the authorities have to impose a cap on rental increases because owners are aware of the high demand for residences. Another reason for rent hikes is the real estate lobby.

My colleagues are reporting that one-bedroom apartments in good buildings are now priced at 100K, while 3-bedroom apartments are close to 180K in the Manasir areas.

I know people who work for the government and commute from Al Ain every day. A close friend of mine just rented a flat in Al Rahba.

Many flats are located within villas, which may be suitable for private firms. However, it seems that government employees are required to provide drawings and Abu Dhabi Municipality documents for new constructions. This implies that if a flat is part of a villa without the necessary permissions, you could encounter some challenges.

There is a rumor circulating that there will be a "No increase" decree for 2008. I guess we will have to wait and see.

Cheers

Hi Guys.

I just happened to go through all the posts above.

I have one small suggestion that might be worth your while in following up. The situation there may be different from what prevails in Mumbai, but here goes.

The demand-supply situation there is artificially trumped up where the actual users are far less than the number of units coming up in the market each year. But the trading is rampant and coupled with rising costs, the accommodation is bound to get costlier.

Just get in touch with all the big names developing in your area. Put forth your requirements for rental accommodations required and the number of years you think the same would sustain. Each Developer would have a huge database of investors who would like to hold on to their properties/would not have been able to offload the properties due to market conditions. You'd stand a good chance negotiating bulk rentals with them.

Mind you, this is ONLY if you guys rent a sizable number of units. The concept of REITs, i.e., Real Estate Investment Trusts, is definitely catching on in Asian as well as Middle Eastern places; hence, there are a lot of Developers creating Assets for selling off lock, stock & barrel to pension funds/REITs at a later date. The model is not very complex and works well for everyone because in many countries, people get only 2-4% returns on investment per annum. Hence, they invest in limited funds/REITs dealing with properties to get a better upside because, hey, Real Estate still is the safest investment!!

Best regards.

Addressing this question, "Does your company provide any mechanism like interest-free loan from the organization to meet the one-year rent upfront obligation?"

Aren't companies giving employees their HRA in advance of three months at least? Ours does. More often than not, the house rent has to be paid up in 4 installments. Three months or one quarter's HRA is paid out in advance and deducted on a monthly basis. This has helped a great deal.

Dear Abl, Some companies do give HRA in advance as stated by you for a period of 3-24 months, and this HRA is not paid to them until that period.

Now coming to the point of interest-free loan, at a certain point, companies used to do that, but now because of various issues/malpractices, they have stopped. This affects the cash flow of the company if they continue to offer interest-free loans.

Sometimes a small amount can be given to an employee (on special recommendations) and deducted in 6 months. But this happens only in certain or special cases. Once again, this solely depends upon the management to give it or not.

Hi again,

My interest in how the private sector is handling this stems from some knowledge of Western expat professionals who have been caught ill-prepared to pay $150,000 and upwards for accommodation upfront when their contract is lump sum. Most people I know don't come with a year's rent in their hand, since we simply don't work that way back home. At most, we would expect a deposit and the first and last month's rent, not the ENTIRE year in one go.

Furthermore, you can't get a loan from a bank until you have had salary deposits, and oftentimes that doesn't happen until after your temporary housing (hotel apartment) agreement has been exhausted. It has made several expats I know think twice about the challenges of coming to the UAE and caused tremendous stress on an individual who is trying to adapt, adjust, and be productive in the first few weeks. There has to be a better way...

More often than not, the house rent has to be paid in four installments. Three months or one quarter's HRA is paid out in advance and deducted on a monthly basis. This system has been very helpful.

Most people I come into contact with have to pay the entire amount upfront, or at best, in two payments.