New Dubai smart rental index: Landlords must improve property ratings to hike rents
The old buildings that landlords own in Dubai will need to be modernised to level up with luxury ones and get upgraded based on their rating in order to fetch higher rents, authorities announced the new smart rental index details on Thursday.
Dubai Land Department (DLD) released its smart rental index which will add "fair value to rental valuations" and improve confidence for landlords, tenants and investors.
The new index ties categorization and rating of the buildings with renting in the city. It is applicable to all residential districts in Dubai– Freehold & Non-Freehold.
"We connected the index to building classification system and also asked the owners to update their properties as this will increase the living standard and rentability of the owners," Majid Al Marri, CEO of Real Estate Registration Sector at Dubai Land Department.
"We expect some owners who are looking to increase their rents will come to us for review. ‘Landlords can build buildings and that’s an investment because then they can rent up," said Al Marri.
"The category has more than 60 criteria, and one of the index criteria is building category. "To make rents go up one has to make classification and rating go up," he said.
smart index will be encompassing the residential area first and commercial area in second. Dubai apartments are listed in one-to-five-star grading and rentals are calculated based on it.
Fair rental
Al Marri told me the smart rental index will give "a good price and rental and affordable."
With the new index, he also added, the rents can be modified by landlords as per the rental laws in Dubai. "We have financiers, landlords and tenants. We are trying to even the lease. This index should be shared among all — tenants, owners, market — and this will even the playing field. We want all of them to be happy. Investors won’t pay if they don’t get a return. We want people to live in Dubai too. And plenty of people will become owners too. So we’re trying to apportion three parts," he said.
Several criteria
The index is based on a number of variables, Khalid Al Shaibani, who heads the Rental Affairs Department at DLD.
"It takes average area rent, building and contracts old and new, classification. All of this will have weighting. It is a just game," he told the index launch.
He placed in addition the earlier index treated as average rental contacts across the region.
"If it’s fancy and the building is old, then the index will consider average rent for that building plus the size of the whole area. This will be fairer for tenants because it also looks at each building," he continued.
Al Shaibani also said that the major issue was a arbitrary increase in rent and this index would yield a more consistent and just rent since the increase would be fixed at the building level.
"We’re not pushing for increments but improving the quality of life and standards of living in Dubai so people, landlords, and owners are happy," he continued.
Attract more investment
Al Marri said that the old index was changed only once every year and the new index is changing in minutes in all parts of Dubai. "The new additions to the index will make landlord-tenant disputes less likely by more than 20 per cent," he said.
Majid Al Marri, in accordance with Dubai’s Digital Strategy, added: The Index will be transparent, trustful, fair and sustainable — to benefit everyone in the industry.
"Dubai is a global brand of leadership and innovation with people at the centre. The smart rental index, launched this year, is a major step towards controlling Dubai’s property market through the integration of AI-based ecosystems. This will make Dubai a global investment center," said Al Marri.
Rent increases from 0%
Under Dubai's Decree No. (34) of 2013, rent hikes in Dubai start from zero per cent for those tenants paying less than 10 per cent less than the average price. The hikes can go up to 20 per cent for rents above average by more than 40 per cent.
This index comprises all residential properties in Dubai ranging from prime districts, special development zones and free zones which assures common valuation and pricing rules.
Furthermore, DLD announced the ‘Model Tenant Classification’ system, an additional mechanism to classify the credit score of tenants and get credit reports via Ejari system and smart app for interested parties.
As many as 900,000 registered lease agreements were under negotiation in 2024, up 8 per cent from 836,000 in 2023.
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