Dubai's New Rental Index: Fair and Transparent
90-Day Advance Notice Required for Rent Increases – New Smart Rental Index Introduction
The Dubai Land Department (DLD) has issued another important announcement that brings further transparency and fair regulation to the rental market. The statement declares that landlords are required to provide tenants with a 90-day advance notice of rent increases, even if the property is eligible for a rental increase according to the new smart rental index. This rule remains in effect even if the property qualifies for a rent increase under the new index.
What Has Changed About Rental Prices?
The Dubai Land Department highlighted that the 90-day notification rule remains unchanged, regardless of whether the property is eligible for a rent increase under the new index. If the landlord has given the necessary 90-day notice and could have increased the rent under the previous index but cannot under the new index, then the renewal date of the lease agreement is determined by two factors:
If the contract is renewed before 2025, the rent is determined based on the previous index.
If the contract is renewed in 2025 or later, the new index applies.
This system aims to provide clear and predictable rent developments for both landlords and tenants.
Goals of the New Smart Rental Index
The new smart rental index introduced in January 2025 considers various new aspects, such as building classification, old and new rental prices of the building, and the nature of the area. The index aims to make the market more transparent and rent developments more accurate and realistic.
The General Manager of the DLD's Real Estate Registration Sector emphasized that the index sets clear and standardized criteria for determining rent increases, in line with actual rental values and market trends. In 2024, over 900,000 rental contracts were executed in Dubai, marking an 8% growth compared to the previous year.
How Are the New Rent Prices Calculated?
Various factors are considered when calculating the new rental values, such as the values of lease agreements in the building, average area rents, and building classification. The index uses artificial intelligence to determine precise and standardized rental prices applicable to all residential areas, including key districts, special development zones, and free zones. This enhances market transparency, ensures fairness, and strengthens trust in the Dubai real estate market.
Reducing Inflation and Stabilizing the Market
The regulator states that the new index contributes to reducing inflation. Over the past four years, rental prices have continuously increased, significantly contributing to the growth of Dubai's inflation basket. The index aims to bring stability to rental prices and maintain them at a more realistic level.
According to Cushman & Wakefield Core data, in 2024, rental prices in Dubai for apartments increased by 16%, while villa rents saw a 13% rise. This rental price growth has persisted for 16 consecutive quarters, reflecting the market's dynamics and growing demand.
Why is the New Index Important?
The smart rental index not only helps reduce inflation but also enables participants to make informed investment decisions based on reliable data. The Dubai Land Department also stated that it will regularly update the index to ensure a fair and balanced approach for landlords and tenants.
Summary
Dubai's new smart rental index is a significant step towards transparency and stability in the rental market. The 90-day advance notice obligation remains in force, regardless of whether the property can raise rent under the new index. The index uses artificial intelligence to determine precise rental prices and contributes to reducing inflation, while providing reliable data for market participants. This development further enhances the reputation of Dubai's real estate market and ensures that rental prices remain realistic.
