Mexico City.- The reform proposal that states that the annual increase in rent should not exceed inflation in Mexico City generates uncertainty and is not clear, considered the Cluster of Innovation and Real Estate Transformation (CITI).
In a statement, the organization said that the initiative may initially have a noble essence when comparing the increase in rents with the current cost of living, however, it raises many questions.
“The approach is wrong, since not all incomes can be evaluated in the same way, because the ranges are very wide and the real estate market is very diverse,” said Fernando Rodríguez Bustamante, member of the Council of Professional Real Estate Agents (CIP) of CITI. He said that what is controlled tends to discourage, and that it could be detrimental to the real estate sector.
He considered that subordinating the increase in income to inflation will have negative repercussions, since increasing an income from 5 thousand pesos to one of 50 thousand pesos is not proportional.
“The first will need a higher increase so that the rent is sufficient to live with dignity, while, in a high rent, of about 50 thousand, its increase must be lower so that the price does not go out of the market and guarantees the permanence of the tenant,” he explained. He mentioned that if inflation exceeds 10 percent, it will be a major problem for the generation of income, since it must be remembered that during the pandemic, leasing was the engine of the real estate sector. CITI added that the registration of contracts and their immediate approval proposed in the aforementioned initiative is seen as a negative measure that may discourage owners from renting their properties for fear that it will translate into a first measure of control by the State over their property. “The above causes uncertainty to the owners, because the intention of registering the contracts and whether or not the government authorizes a rent is not clear, when said approval has nothing to do with the effectiveness and legality of these,” he assured. Rodríguez Bustamante pointed out that within the positive aspects of the rent cap in the Capital of the Country, it could be that its effects limit the increase in rents capped at the inflation rate, although he noted that in the lowest segments it is difficult to find rents that increase by that percentage. “Another aspect that could be positive would be that gentrification or displacement would be discouraged. The sector considers that the initiative could be convenient if the increase were staggered by the price range,” he pointed out.
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