Dubai Implements New Regulation for Rent Re-evaluation, Enhancing Tenant Protections

Landlords Now Required to Obtain Legal Order for Rent Re-assessment

Dubai, April 3, 2024 – A significant change has taken effect this month in Dubai’s real estate market, impacting landlords and tenants regarding rent re-evaluation procedures. In a shift from previous practices, landlords desiring to re-evaluate rental rates must now secure a judgment or legal order to apply for the rent evaluation service with the Real Estate Regulatory Authority (RERA), starting April 1, 2024. This development marks a departure from the recent trend where landlords could request rental valuations by merely paying a fee to the Land Department.

Adapting to Updated Rental Index Regulations

The modification in procedure aligns with RERA’s recent update to its Rental Index in March 2024, designed to enable landlords to adjust rents in accordance with the rising rental market. Traditionally, landlords could utilize a rental evaluation to match the current market rates against the benchmarks set by an outdated calculator. However, with the revised RERA calculator now serving as the sole benchmark for rental increases, landlords are restrained from elevating rent prices beyond the calculator’s guidelines, ensuring a more transparent and equitable process for tenants.

Enhancing Market Transparency and Fairness

Anisha Sagar, director of property management at Allsopp & Allsopp Group, commented on the changes, noting the substantial volume of rental contracts and renewals managed annually. “As of the first quarter of 2024, we’ve seen 72,885 rental contracts renewed, which reflects the decisions of 145,770 tenants and landlords. Considering this volume, it’s pragmatic for the RERA calculator to act as the single source of truth,” stated Sagar. The introduction of a legal requirement for rent re-evaluation aims to ensure that adjustments are meticulously vetted, aligning with the updated benchmarks and fostering a fairer landscape for both landlords and tenants.

Observing Market Trends and Tenant Movements

The real estate market in Dubai has observed a 7.2 percent decrease in rental contract renewals year-on-year, with the first quarter of 2023 witnessing 78,565 renewals. This trend may indicate a growing inclination among tenants towards purchasing homes in Dubai, driven by the consistent rise in rental prices over the past year. The new regulation could thus play a pivotal role in stabilizing the rental market and providing tenants with a more secure and transparent framework for their housing decisions.

Future Implications and Market Stability

This regulatory adjustment is expected to have far-reaching implications for Dubai’s rental market, potentially stabilizing rent fluctuations and reinforcing tenant protections. By necessitating a legal basis for rental re-evaluations, Dubai is taking a step towards more equitable housing practices, ensuring that rental increases are justifiable and aligned with market realities. As the market adjusts to these changes, the focus remains on balancing the interests of landlords and tenants, fostering a healthy and sustainable real estate environment in Dubai.