Tenants Gain Clarity on Rent Increases and Building Standards.
Dubai: A groundbreaking rental system is now live in Dubai, introducing a ‘star rating’ classification for buildings that determines rental rates and potential increases. This innovative approach aims to enhance transparency and fairness for tenants and landlords alike.
How the ‘Star Rating’ System Works?
The new rental index focuses on individual buildings rather than zones or districts, as was the case with the previous system. Landlords can set rental rates based solely on the building’s star rating, with adjustments allowed based on upgrades or appraiser approvals.
- Older Buildings, Lower Rates: Tenants in older or poorly maintained buildings will not pay the same rents as those in higher-rated, well-maintained properties within the same area.
- Frequent Updates: Unlike the earlier system, which updated annually, the new index will provide real-time updates, ensuring accurate and timely adjustments.
Currently, only building owners have access to the star ratings, though the Dubai Land Department (DLD) may extend this information to tenants and property owners in the future.
Encouraging Building Improvements:
Building owners with lower ratings can invest in upgrades to improve their property’s classification. Once approved by the appraiser, these upgrades will result in immediate changes to the rating, allowing landlords to potentially adjust rental rates.
Key Features of the New Rental Index:
- Focus on Individual Buildings: Rents are calculated based on average rates within a specific building and the surrounding area, ensuring older buildings in upscale neighborhoods cannot demand the same rents as new constructions.
- Citywide Coverage: The system encompasses most residential properties in Dubai, both freehold and non-freehold, though non-residential properties are excluded for now.
- AI Integration: Powered by AI, the system ensures over 90% accuracy, with instant updates when new rental contracts are signed.
Reducing Rental Conflicts:
The DLD expects the new system to significantly cut rental disputes by at least 20%. “This phase enhances transparency and builds trust in this vital sector,” said Majid Al Marri, CEO of Real Estate Registration & Services at the DLD.
Rental Market Growth in Dubai:
Dubai’s rental market has seen notable growth, with over 900,000 rental contracts signed in 2024, an 8% increase from the previous year. The real-time index aims to sustain this momentum while fostering better tenant-landlord relationships.
What’s Next? For Landlords – Setting Rental Rates!
Landlords can access their building’s rating via the DLD app and use it to determine appropriate rental rates. The system incentivizes property owners to improve their building’s quality, aligning with Dubai’s goals for a more sustainable and attractive real estate market.
“This initiative encourages owners to prioritize quality and transparency,” noted a DLD official.
Dubai’s new rental index marks a significant shift in the city’s property landscape, ensuring fairness, reducing disputes, and promoting improvements in building standards.
