The city of Dubai is all set to introduce a new building classification system in addition to its new rental index. Dubai’s new rental index is based on the 1-5 star rating associated with the building. Now, the landlords can set rates, and most importantly, decide how much they can raise it by for renewal.
If the tenant is living in an older building that has a lower rating, then, he or she will not be paying the rents at the same level for properties that are better kept and well-maintained in the area. The earlier rental index was based on zones or districts, however the new one will be applied on individual buildings. And the updates for the same will be far more frequent the previous rental index that was done once a year.
Dubai’s New Rental Index got live on January 2nd, 2025.
The Working of Dubai’s New Rental Index
• The 1-5 star rating will apply to the building and not the individual property within it. At a later date, the rating system could extend to individual units as well.
• A building owner with a low rating can bring and do upgrades to his/her assets once that meets the approval of the appraiser. The uptick to the rating system will happen on an immediate basis.
• Dubai’s new rental index will be calculated on the basis of the average rents within that building plus factor in the area. This means if an old building with less than proper upkeep in the sought-after area cannot demand rents at the same levels like those for the new buildings.
The 1-5 star rating associated with a building is known to the owner of the building, as of now. The Dubai Land Department will consider the extension of the information to the property owners or tenants later on. In the recent years, the city has completed an ambitious “star-based” building classification system. Now, this classification will take effect with the Digital Rental Index.
The Areas to be Covered
Unlike the previous rental index, the new and the latest one covers most of the city, no matter if they fall under freehold or non-freehold areas.
“This is a new phase to enhance transparency and build trust in this vital sector,” according to a statement by Majid Al Marri, CEO for Real Estate Registration & Services at Dubai Land Department.
Dubai’s New Rental Index to cut Rental conflicts by 20%
“This will also help reduce conflicts on rental issues – what Dubai has done with the real-time Rental Index is bring in even more clarity for investors, tenants and all those in Dubai real estate.”
The updates when new rentals comes into effect will be done ‘instantly’. The Dubai Land Department expects to reduce rent related conflicts by about 20%. “If possible, even more,” said the Director of Rental Affairs at DLD; Khalid Al Shaibani.
A Whopping Increase of 8% in Dubai Home Rental Contracts
More than 900,000 rental contracts were signed in Dubai in 2024, as compared to 836,000 a year ago. The system will depend almost exclusively on AI inputs, and with levels of accuracy expected to be at more than 90%. Dubai Land Department officials say that the process of registering will be quite straight-forward. “Maximum transparency” being the theme.
What Can Landlords do to ncrease the rent?
The owner of the property will know his/her unit’s rating through the app of the DLD. Depending on that, the landlord can raise the rent for a lease, whether new or at renewal.
According to a DLD official, “We want to encourage all owners to improve quality of the building and make use of the star classification system.”
Source: Gulfnews
