Real Estate

New rental index for Dubai to curb rises and disputes

January 2, 2025, 6:38 PM

The new system is designed to reduce disputes between tenants and landlords

60 factors accounted for
Links rent increases to ratings
Replaces district-based model

A new residential rental index to help tame a property market strained by soaring rents and landlord-tenant disputes has been unveiled in Dubai.

The Dubai Land Department (DLD) launched the Smart Rental Index on Thursday. The tool regulates rent increases by tying adjustments to individual property and building ratings, replacing a district-based model that grouped buildings into rent bands solely based on location.

The new system evaluates buildings using detailed data and a star rating determined by more than 60 factors, including technical and structural characteristics, the quality of finishes and maintenance, location and spatial value, and the level of services and facilities available, such as maintenance, cleanliness and parking management.

“This index will tweak the market,” Majid Al Marri, CEO of real estate registration and services at DLD, told AGBI at a press conference.

Al Marri explained that the new index will be based on a combination of the average rent in an area, the average rent in the building, based on existing and new rental contracts, and the new quality classification system.

Under the previous model, older properties in high-end areas could command rents similar to those of newer or well-maintained developments, raising affordability concerns for tenants.

Al Marri said the new index addresses this imbalance by linking rents to building quality.

“If the area is fancy and the building is old, the index will [now] consider the average rental of that building plus the overall area,” he said. The mechanism ensures more accurate and fair rental values, Al Marri said.

The new index also aims to promote investment by offering landlords clearer return-on-investment metrics while encouraging them to upgrade properties to justify higher rents, he said. Landlords “will invest more in their building. This investment will come back through more rent. This will be fair for all.”

The system will also help investors assess property income potential, Al Marri said.

For residents, the rental index offers relief in a market where housing costs remain a main driver of inflation, with rents increasing nearly 21 percent in November alone, according to Emirates NBD.

The city registered more than 900,000 rental contracts in 2024, an eight percent increase from the previous year, driven by a population boom and an influx of wealthy expatriates.

Officials expect the system to reduce rent-related disputes by more than 20 percent.

“Based on our regular studies of the market, we saw it’s time to have something more accurate based on the rental dispute cases we see,” Al Marri said.

“It’s a difficult problem. The owner wants to increase rents and the tenant wants to decrease.”