Riyadh Freezes Rent Increases for Five Years

Riyadh Freezes Rent Increases: No Residential or Commercial Rent Hikes for Five Years

Saudi Arabia is implementing strict new regulations in the capital, Riyadh's rental market to curb the rapid increase in property prices. The decision mandates that rental fees for both residential and commercial properties will be frozen for five years, prohibiting annual price hikes compared to the rent specified in the current lease agreement. The regulation aims to bring stability, transparency, and fairness to the market, with a particular focus on tenant protection.

What justified the stricter regulation?

In recent years, rental prices in Riyadh have drastically increased for both residential and commercial spaces. This placed a severe burden not only on the population but also endangered the city's economic dynamism, as it became increasingly challenging for small and medium-sized enterprises to operate sustainably. As a result, authorities decided on a systemic intervention to curb market overheating.

The decision was made with support from the highest level, the country's crown prince, and is part of a comprehensive urbanization and social reform program aimed at improving the quality of life for the population in the long run.

The rules for freezing rent prices

Under the new regulation, the rent for any property previously leased must be based on the amount in the last valid lease agreement. For example, if an apartment was leased in 2024 for 5,000 SAR per month, this rate cannot be increased for five years, regardless of market trends.

For properties never before rented, rent can be determined through agreement between the owner and the tenant, allowing for flexible price negotiation while ensuring that the initial rent remains realistic and competitive.

Mandatory Ejar registration

All rental agreements must be registered with the Ejar system, Saudi Arabia's official electronic registry for leases. Tenants and owners have 60 days to dispute contract details, after which the system considers the agreement valid.

The purpose of Ejar is to establish an official, trackable database of rental agreements, enhancing transparency and expediting the resolution of disputes.

Automatic lease renewal

Under the new rules, rental agreements automatically renew unless either party provides written notice at least 60 days before expiration that they wish to terminate the agreement. The owner may refuse renewal only in a few exceptional cases – such as non-payment of rent, structural issues with the property, or if the owner wishes to use the property for personal use.

This provision offers strong protection to tenants and makes housing and commercial activities more predictable.

Challenging the rental fee

Owners can request rent adjustments under certain conditions – for instance, if they've undertaken significant renovations or if the last lease was made before 2024. In such cases, the regulatory authority will determine the legitimacy of the request. The reasons for rent increases are strictly regulated, eliminating the potential for abuse.

Penalties and rewards

Violations of the new rules can have serious consequences. Fines can reach up to 12 months' worth of rent, and the owner must correct the violation and compensate the tenant. Notably, those who report a violation may receive 20% of the collected fine as a reward, encouraging tenants to speak up with their complaints.

Decisions can be appealed in court within 30 days, ensuring the possibility of legal remedy.

Objective of the regulation: a fair and sustainable rental market

The entire package of measures aims to transform Riyadh's rental market into a more transparent, stable, and equitable system. The General Real Estate Authority is responsible for enforcing the rules, issuing guidelines, and resolving disputes.

The long-term goal is to support urban development, reduce the housing crisis, and improve the quality of life. A stable rental market contributes to strengthening the middle class, diversifying the economy, and ensuring business sustainability.

What does this mean for the region?

The measures introduced in Riyadh could serve as a model for other major cities in the region, such as Dubai, where rental prices are also experiencing rapid growth. Although Dubai currently employs different market regulations, the Saudi model could inspire decision-makers facing similar challenges in the long run.

The present decision demonstrates that countries in the region are willing to take significant steps to protect their residents from market excesses – even if this means robust state intervention.

Summary

Riyadh's new rental regulations represent a paradigm shift in the region. The five-year rent freeze, mandatory Ejar registration, automatic lease renewal, and stringent fine and complaint-handling system all serve to make the rental market more equitable and transparent. This advancement is crucial for the growth of not only tenants but the entire city.

(Source: Statement from the Saudi Arabia Crown Prince.)