New Dubai smart rental index: Landlords must improve property ratings to hike rents

Landlords of older buildings in Dubai will now have to renovate their properties to bring them up to par with luxury buildings, raising their ratings in order to increase rents, according to authorities announcing the details of the new smart rental index on Thursday.

Dubai Land Department (DLD) launched its new smart rental index, which brings "fair value to rental valuations" and boosts confidence among landlords, tenants, and investors.

The new index links classification and ratings of the buildings when it comes to increasing rentals in the city. It covers all Dubai's residential areas– freehold and non-freehold areas.

“We linked the index to the building classification system and also encouraged owners to keep their buildings updated as this will improve the quality of life and rental value for owners,” said Majid Al Marri, CEO of the Real Estate Registration Sector at Dubai Land Department.

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“We are expecting that some owners who want to increase their rents will resort to us for evaluation. Landlords can invest in buildings and this can be a good investment because in return they can increase rentals,” said Al Marri.

“The classification has more than 60 criteria, and one of the criteria used in the index is a classification of buildings. If someone wants to increase rents they have to increase classification and rating,” he added.

The smart index will cover the residential segment in the first phase, and then the commercial segment will be added later.

Dubai residential buildings are ranked from one to five-star ratings, and rental values are adjusted accordingly.

Fair rental

Al Marri said the smart rental index will give “a fair price and rental and make it affordable.”

Under the new index, he added that landlords can adjust the rentals in line with Dubai regulations around rentals. “We have investors, landlords and tenants. We are trying to balance the lease price. We want everybody to benefit from this index, whether tenants, owners, or the market, as we try to balance the situation. We want everybody to be happy. If investors don’t get a return, they will not invest. We want people to live in Dubai as well. A lot of people will turn owners also. So we’re trying to create a balance between three parties,” he said.

Several criteria

Khalid Al Shaibani, director of the Rental Affairs Department at DLD, said the index depends on several criteria.

“It takes average rent in areas, the building itself and old and new contracts, in addition to classification. All of this will have weighting. It takes a fair approach,” he said at the launch of the index.

He added the earlier index considered average rental contacts registered throughout the area.

“If the area is fancy and the building is old, the index will consider the average rental of that building plus the overall area. This will be fairer for tenants as it also considers each building,” he added.

Al Shaibani added that the main challenge was a random rent increase and that this index would have a fairer and more accurate rental since the hike would be decided on the building itself.

“We are not encouraging increments, but we are focusing on upgrading the quality of life and standards of living in Dubai, where people, landlords, and owners are happy,” he added.

Attract more investment

Al Marri added that the previous index was updated once every year, and the new index can be updated in minutes across all areas of Dubai.

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