Landlords must improve property ratings to hike rents
New Dubai Smart Rental Index.
Dubai has unveiled a new smart rental index designed to bring “fair value to rental valuations” and boost confidence across the real estate sector. This innovative system links rental increases to building classifications and ratings, encouraging landlords to invest in property upgrades.
Key Features of the New Index:
- Building Classification System: The index is tied to a comprehensive building classification system with over 60 criteria. Landlords wishing to increase rents will need to improve their building’s rating.
- Multiple Criteria: The index considers several factors, including average rents in the area, the building’s age and condition, existing and new contracts, and building classification.
- Star Ratings: Dubai residential buildings are ranked from one to five stars, with rental values adjusted accordingly.
- Fair Pricing and Affordability: The index aims to ensure fair rental prices and maintain affordability in the Dubai market.
- Reduced Conflicts: The new index is expected to reduce conflicts between landlords and tenants by more than 20 percent.
- Real-Time Updates: Unlike the previous annual updates, the smart index can be updated in minutes across all areas of Dubai.
- Transparency and Trust: The index promotes transparency, builds trust, and fosters a sustainable real estate ecosystem.
- Residential Focus Initially: The index will initially focus on the residential segment, encompassing both freehold and non-freehold areas, with plans to include the commercial segment later.
What This Means for Landlords:
Landlords of older buildings are now incentivized to renovate and upgrade their properties to achieve higher ratings, which will then justify rental increases. This encourages investment in property improvements and contributes to raising the overall quality of living in Dubai.
What This Means for Tenants:
The index offers greater transparency and fairness in rental pricing. By considering the specific building’s condition and rating, it prevents arbitrary rent increases based solely on area averages. This provides tenants with more security and predictability in their rental costs.
Looking Ahead:
The launch of the smart rental index marks a significant step in regulating Dubai’s real estate sector. By leveraging technology and data, the DLD aims to position Dubai as a leading global investment destination. With over 900,000 registered lease contracts in 2024, an 8% increase from 2023, the impact of this new index is poised to be substantial.
