Dubai's smart rental index: Tenants to benefit from fairer pricing, better lease terms

Dubai's new smart rental index is expected to bring fair pricing for new and old buildings, reflect more precise rents of the building rather than the broader area and could prevent arbitrary rent increases by landlords, say industry executives.

The Dubai Land Department on Monday announced that it would unveil a new 'smart rental index' in January which will foster trust, transparency, and confidence among landlords, tenants, and investors. The Department had revised its rental index calculator in March 2024.

Rohit Bachani, co-founder, Merlin Real Estate, said tenants have struggled with the rent inconsistencies as landlords adjusted pricing based on the development of newer, more modern buildings.

Stay up to date with the latest news. Follow KT on WhatsApp Channels.

“This has often led to situations where tenants in older properties were charged similar rents to those in newly developed buildings with better amenities. The introduction of Dubai's smart rental index marks a significant step forward in addressing these issues, as it ensures rents are more reflective of the specific property rather than the broader area,” he said.

Bachani added that initiatives like the Makani and Ejari system enable the index to incorporate metadata, offering unit and building-level comparisons. "This is a crucial advancement for tenants, as it prevents arbitrary pricing in areas with a mix of both new and older buildings. For instance, in areas like Downtown and Business Bay, where the range of building quality is wide, the new index will shift from an average area price to a more precise and fair pricing model based on the specific building and unit," said Bachani.

Addressing discrepancies

Firas Al Msaddi, CEO of fäm Properties, said while the details remain limited, the initiative appears to aim at delivering more accurate rental evaluation.

“Currently, the existing rental index operates with a basic formula that overlooks critical elements such as unit size, views, location, and access to unique amenities like parks or other selling points. For instance, a three-bedroom apartment could vary significantly in size, ranging from 1,400sqft to 3,000sqft, yet the current system doesn’t adequately reflect these differences in rental value.

"The new smart rental index, however, promises to address such discrepancies. By incorporating these diverse parameters, it has the potential to provide a more precise and transparent guide for tenants and landlords alike. This would minimise situations where properties are undervalued or overvalued in comparison to their true market potential,” added Al Msaddi.

He elaborated that the news index is expected to leverage AI to analyse historical data, refine its methodology, and deliver increasingly accurate rental evaluations.

"Another positive step forward is the potential for the smart rental index to distinguish between new rental contracts and renewed ones. In a rising market, renewal rents tend to be slightly lower than rents for new contracts, while the opposite is true in a softer market. The current index does not account for this distinction, which could be a game-changer for both tenants and landlords," said CEO of fäm Properties, adding that it will bring 'fairness to the rental market'.

Real-time data

Danish Sharif, CEO of Blanco Thornton Properties, said the data “will provide real-time data on rental prices and availability across Dubai.”

• Dubai: Luxury apartment 'shortage' fuels sharp increase in rental prices