Pressure builds on homeowner associations to get higher star ratings for their buildings.
Dubai: Searching for a home with lower rent on an apartment in Dubai? All you need to do is check the building’s star rating system.
Just days after the Dubai Land Department launched its digital Rental Index, tough negotiations have started between tenants and landlords over renewals, particularly about how much of a rental increase tenants are required to pay.
The same dynamics are at play when tenants seek new leases, marking what property market sources describe as a “real-time shift” where tenants exercise their rights.
“Landlords will have to reveal the star rating assigned to the building at the time of the contract,” said the owner of multiple buildings in Dubai. “The landlord will need to prove their star rating. If it’s a 4-star building, only then can they justify an increase of up to 20%.”
Currently, most buildings in Dubai—especially new ones—fall under the 3- or 4-star categories. These newer buildings typically feature well-maintained common areas, gyms, and pool facilities, which benefit from their relative newness.
However, older buildings with lower star ratings due to inadequate maintenance will face challenges in setting rents and attracting tenants.
‘More Pressure on OAs’
In freehold apartment buildings, homeowner associations (OAs) are under increasing pressure. These associations award annual contracts to property and facilities management companies to ensure building upkeep, while individual homeowners handle their apartments.
“This is a ‘real-time’ index, so one can go to the Dubai Land Department website, enter property details, and it will provide the estimated rental value along with the bands,”
explained Sameer Lakhani, Managing Director at Global Capital Partners.
To meet rising expectations, OAs set annual service charges to fund building maintenance and repairs. “As tenants gain bargaining power from the star system, landlords will put pressure on OA management companies to enhance building amenities,” Lakhani added. “Landlords will also have to upgrade their apartments.”
“This will gradually lead to a more qualitative assessment of rental values and property prices in Dubai,” he noted.
If homeowners feel their property management companies fail to meet expectations, they are likely to replace them. “Previously, OAs selected property management companies based on the lowest quoted prices,” said the owner of a leading facilities company.
“From now on, winning contracts will require a balance of competitive pricing and higher maintenance standards. It won’t be easy…”
3-6 Months for Effects to Show:
According to Dubai property market sources, the full impact of the new star rating system will become evident by June-July. Key factors contributing to this include:
- Most areas and buildings in Dubai have already seen three years of rental increases. Even before the digital Rental Index launch, the rate of rental hikes had begun to slow.
- Newly completed buildings entering the market will carry a premium based on location and higher star ratings.
- Older buildings will experience the most noticeable changes once their leases come up for renewal, dictating future rental trends.
“Homeowner committees will play a more active role in protecting and enhancing asset value under Dubai’s new star-rated Rental Index,”
said Khalid Yusuf, Director at Homes 4 Life.
“In the medium term, tenants in Dubai’s mid-range residential market may see moderated rental values,” Yusuf added. “It will become harder to raise rents unless landlords invest in significant upgrades to justify the increase.”
In other words, landlords may need to heavily renovate older buildings to demand higher rents. Either way, tenants find themselves in a favourable position, or at the very least, in a win-win situation.
“Similar to Dubai Tourism’s hotel apartment ratings, the Rental Index system assesses factors such as maintenance, amenities, services, and overall tenant satisfaction,”
Rohit Bachani, Co-founder of Merlin Real Estate.
