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The topic of rental increase in Dubai is one that I almost always end up discussing with clients, mostly tenants or landlords but investors are also curious to know what they might face in the future if they end up letting their property.
Understandably, a landlord will want to let his apartment or villa for the most money possible to maximize his investment. At the same time, the tenant wants to rent the same for the lowest cost possible. Tenants will be worried about facing a rental increase upon renewal of their contract, and landlords would like to increase the rent. So how is the rental increase managed in Dubai and how do you know if your rent will increase or not next year?
The law
In Dubai, the rental increase is determined by decree No. 43 of 2013 and is easily determined by the rental increase calculator. This law takes into consideration the apartment size, the area in which the apartment is, the current rent paid, and the current average rent of a similar unit in the area as per the rent index of the Emirate of Dubai, which is approved by the Real Estate Regulatory Agency. With those details determined, the rental increase calculator will come out with one of the following outcomes:
If the current rent is less than 10% below the current market price, thereās no rent increase when the contract is renewed unless mutually agreed on.
If the current rent is between 10% and 20% below the current market price, thereās a 5% rental increase.
If the current rent is between 20% and 30% below the current market price, thereās a 10% rental increase.
If the current rent is between 30% and 40% below the current market price, thereās a 15% rental increase.
If the current rent is 40% or more under the current market price, thereās a 20% rental increase, which is the maximum allowed.
This calculation must be done prior to the renewal, and the landlord or agent must inform the tenant of the increase at least 90 days before the expiry of the contract.
Good for stability
In a very fast changing market like Dubai, everything goes against stability as most residents arenāt locals. When thereās an economic upturn, the population grows overnight, and economy is boosted even more. At the same time, when the economy is down, people start leaving and the downturn goes even lower than expected.
This law protects tenants from these sudden fluctuations and allows them to keep the same lifestyle and stay in his apartment without suddenly affecting his expenses or established routines excessively. At the same time, it also minimizes the financial losses on the landlord while still keeping the apartment occupied and dividends keep coming in. With the Dubai rental increase law, a sudden change in the market wouldnāt cause sudden changes to landlords and tenants, making the increase progressive and easier to absorb.
The impact for Dubai as a whole is that a massive tenant relocation is avoided, which also slows down the sudden rental market fluctuations. The market upswings and downswings therefore become easier to absorb.
Iām a real estate consultant in Dubai. Feel free to follow me and ask me anything.
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