New RERA Rental Index in Dubai - 2024

Understanding the latest RERA Rental Index update

The latest RERA rental index update marks certain landmark changes for Dubai’s real estate market. The new index, which was implemented effectively from March 1, allows landlords to increase rent up to a permissible limit. Experts across the industry estimate a 20% increase in rental value for tenants in Dubai; this could have a lasting impact on long-term tenants in Dubai. 

Some of the highlights of the 2024 RERA index include:

• Rental increases can only be applied once a year by landlords during the contract renewal period. Tenants must be notified of the increase 90 days in advance. 

• Both parties are advised to verify rent increases on the RERA index calculator to verify whether the new prices fall within the legal range. 

• No rent increase is applicable if the current annual rent is below 10% of the calculated market value. 

• A maximum rent increase of 5% is applicable only if the current annual rent is between 11% and 20% under the calculated RERA market value. 

• If the current annual rent under the calculated RERA market value is 21% and 30%, a maximum increase of 10% is applicable.

• If the current annual rent under the calculated RERA market value is 31% and 40%, a maximum increase of 15% is applicable.

• A maximum rent increase of 20% is applicable only if the current annual rent is over 40% under the calculated RERA market value.

How the new RERA Index impacts long-term tenants in Dubai

Long-term tenants in Dubai have an important decision to make after the new RERA index. Previously, many renters chose to renew their releases - often during the beginning or end of a year - as renewing a lease was more affordable than finding a new property and lease. 

Although rent renewals in Dubai witnessed a 12% increase during 2024’s first quarter, the updated RERA index calculator may reverse the trend. Analysts of property management company Asteco observed that while the increased renewal rate may reflect tenants’ desires to avoid the costs and risks of relocating, landlords can now significantly hike rents due to a more accurate reflection of open-market pricing. 

The revisions to the RERA index may cause many tenants to either buy a property or move out of their current rental and seek a new property. 

Karun Luthra, Vice President of Global Operations at Foremen Fiefdom, explained that if tenants eventually shift to neighborhoods with affordable rents, it will help balance the rental situation. Eventually, rental prices may not rise as much and will be significantly mitigated. 

However, tenants residing in popular locations such as JLT, Dubai Marina, and Jumeirah may still have to pay higher rents - be it through lease renewal or renting a new property.

Anticipated rental increases: what tenants should expect

The increase in rental prices of real estate in Dubai adds to the already surging prices that have been dominating the market for the past few years. A report by property consultancy Cushman & Wakefield noted that as of 2023, rental prices increased by 19%. This, however, was less than the 27% surge that impacted tenants in 2022. 

In 2024, tenants who are renewing their contracts will still likely pay lower rent in comparison to tenants signing new rental leases. Industry experts are also optimistic that the updated RERA index calculator could contribute to lower rent prices in the long run. 

The pool of tenants that will be the most impacted, however, are those living in villa and waterfront apartment communities where demand is high and supply is relatively limited.

Effects on villa and waterfront apartment communities

While rental prices for villas and waterfront apartment communities have been gradually increasing over the past two years, the recent changes to the rental index have caused a stir amongst some tenants. 

Experts comment that many tenants may consider the prospect of shifting to more affordable areas in Dubai - this includes areas such as Damac Hills 2 or Dubai South - areas that are further from the city center.

But the demand for properties in prime locations continues to exist despite rising prices, driving rents even higher.

Long-term benefits of the updated RERA Calculator

While the immediate changes to the RERA index have jolted the market, industry experts believe that the long-term benefits of the changes and the updated RERA index calculator should not be discounted. 

Insights by Business Outreach show that before the RERA index update, there was a significant gap between RERA’s benchmark renewal prices and the actual market rents - especially in sought-after neighborhoods. This resulted in a lack of supply in the market as tenants rarely moved out of their homes. The updated RERA index could encourage more real estate listings, increase tenant turnover, potential interest from investors, and potentially stabilize the soaring prices over time. 

This may also motivate tenants to purchase properties in Dubai rather than simply renting them. Landlords will highly benefit from the updated RERA calculator as they can legally raise their property rents.

Overall, adjusting the RERA calculator could invite greater balance, transparency, and efficiency to Dubai’s property market as the regulated renewal prices will be well-aligned with current market conditions. The regular updating of the RERA calculator will also ensure a dynamic yet balanced property market. 

Utilizing the RERA Rent Calculator for lease renewals

The Dubai Land Department has introduced an online rental index calculator, which not only simplifies the leasing process but maintains fairness and transparency between landlords and tenants. 

It utilizes criteria such as open-market pricing, location, current rent, property type, and the number of rooms to determine the rental prices of a property and whether an increase in rent is applicable or not. 

The RERA rent calculator offers users potential insights about rent adjustments during their next lease renewal. Along with that, it ensures that rent increases remain under legal limits - allowing both parties (landlords and tenants) to make an informed decision. 

Legal guidelines for rent increases in Dubai

It is important for tenants in Dubai to be aware of their legal rights and rental laws. Those who are unaware may face the risk of illegal contractual changes by their landlord.

One of the most common disputes between both parties is when landlords increase the rental amount. While rent increases can be permissible, there are certain legal guidelines that a tenant must be aware of to protect their rights.

The most important legal guideline dictates that tenants must be given a 90-day notice regarding changes in their contract, such as increasing the rent. If a landlord does not provide this notice, tenants can legally refuse a changed rental amount. 

Tenants must also carefully review their contract during rental increases, in case there have been further changes made by the landlord. According to Dubai law, landlords cannot increase their property’s rental amount if the rent of a unit is less than 10% below the average rent of similar units in their area. Currently, the maximum rental increase rate is 20%. 

Steps to take against illegal rent increases

If a tenant is facing harassment in the form of an illegal rent increase by their landlord, they can file a case with the Rent Disputes Settlement Centre at the Dubai Land Department. The Dubai government even issued a rent decree in 2013 to prevent a rise in high rental dispute cases.

Decree 43 applies to landlords across public and private sectors. Article 1 of the decree provides a rent cap layered structure, guiding the maximum percentage permitted in rental increase. The rent cap differs depending on the property rental value and the average market rental rate for properties in specific areas of Dubai. 

Tenants may first attempt communicating with their landlords to amicably arrive at a solution. Utilizing the rental calculator to verify whether a rent hike is warranted or not is an excellent way to protect one’s rights. However, if the landlord is unresponsive, tenants can approach RERA through their website, or visit their office.

Filing a complaint with RERA: a tenant’s guide

Before filing a complaint with RERA tenants must ensure that they have evidence against their landlords - preferably in the form of written communications such as emails. 

Tenants can draft a formal letter to RERA and outline details of their issues, relevant dates, attempts at amicable solutions (if applicable), and supporting documents that may bolster their case. 

They will then be required to visit RERA’s Dispute Settlement Centre (DSC) after submitting their complaint. Both parties (tenant and landlord) will be given an opportunity to present their case and provide evidence. The DSC will act as a mediator between both parties and if an amicable solution is agreed upon, the matter stands resolved. 

If there is no solution, however, the tenant’s case may be transferred to the Rental Dispute Settlement Committee (RDSC) - wherein a judgment will be issued depending on the evidence and merits of the case. If either party disagrees with the judgment, they may approach the Appeals Committee within a specified timeframe for an appeal. 

Along with keeping and tracking important documents, tenants must remain patient as legal proceedings may take a longer time than expected. 

In conclusion, over time, the updated RERA index is expected to foster a more balanced and efficient property market, benefiting all stakeholders in Dubai. As the market adapts, both landlords and tenants can look forward to a more equitable rental landscape.