Dubai Land Department unveiled the smart rental index last week, which takes into account many new aspects including the classification of the buildings, old and new rentals of the building and area among others.
Stay up to date with the latest news. Follow KT on WhatsApp Channels.
It covers all the residential areas in Dubai, including key districts, special development zones, and free zones. The index requires old building owners to renovate and upgrade their assets before raising the rents . While new building owners will be able to adjust the rates higher to be in line with market rates.
Historically, landlords have sometimes requested rent increases that weren't“fair” or valid, said Alec Smith, head of sales and leasing at Savills Middle East. He added that in other cases, tenants have refused or challenged legitimate requests, assuming the landlord was being unreasonable.
“This new smart system provides both parties with a clear and straightforward way to determine what constitutes a 'fair' rent and whether an increase is applicable,” he said.
Alec Smith
Lewis Allsopp, chairman of Allsopp and Allsopp, said the new Index focuses more on fairness and transparency than driving rental prices up across the board.
“What we foresee is a realignment in the market, particularly in areas where the rental averages have historically misrepresented the true value of properties. For example, in communities like Dubai Marina, the older buildings with less modern facilities might see rents level off or even drop,” said Allsopp.
Furthermore, he added that older properties with dated amenities may face pressure to reinvest or accept lower rents due to outdated interiors and facilities.
Up to 15 per cent increase
For new buildings, Allsopp added that high-specification buildings with top-tier amenities could see a 5-15 per cent increase as their true market value is reflected in the index.
Lewis Allsopp
Alec Smith foresees rents in Dubai not increasing beyond the equivalent market rise in property prices.
“The new Smart system will make it easier for eligible owners to implement justified rental increases. There has been significant local and global coverage of the market-leading rise in Dubai's property prices, so it's fair for landlords with existing tenants to benefit from this increase. This system will help ensure rental values are aligned with live market trends rather than outdated historical prices,” he added.
New building owners at an advantage
There are over 200 residential towers in Dubai Marina developed by more than 180 developers, with some buildings nearly 20 years old and others brand new.
“This system allows for more accurate rental valuations based on various factors, rather than applying a generalised price across the entire community or location. As a result, it will create fairer outcomes for both owners and tenants. In short, owners of premium and newer properties will benefit more than landlords of older, less well-maintained properties,” added Savill's Alec Smith.
He explained that the new rental system will allow owners of higher-quality or more sought-after properties to experience faster rental price increases compared to owners of older, less-maintained properties with lower demand.
Lewis Allsopp said the Index is a safeguard against unfair rent hikes for tenants by ensuring rental values are tied to tangible factors like property condition, location, and amenities.
"It helps tenants make more informed decisions about where to live and what they're paying for,” he said.
For landlords, Allsopp said, especially those with newer properties, the index is an advantage.