Dubai’s thriving real estate market is abuzz with the recent recalibration of the Real Estate Regulatory Authority (RERA) rental index. With tenants facing the prospect of higher rents, and property investors eyeing better returns, the real estate dynamics of Dubai is set for a significant transformation.
The revision of the RERA rental index, implemented on March 1, aims to better reflect the current market realities, thereby potentially leading to higher rental prices. For tenants, this means being prepared for potential increases in their rental payments and the possibility of moving out, especially during lease renewals. However, these changes present amazing opportunities for landlords and investors.
From Tenant to Owner
One of the immediate impacts of the recalibrated index is the likelihood of higher rental prices for tenants renewing their leases. Many tenants may now find themselves facing significant increases in their housing costs. This has prompted some to consider alternative options, including the possibility of transitioning from renting to ownership, which promises greater stability and control over their housing expenses in the long run.
Stimulating Demand in New Projects
Moreover, the recalibration of the rental index is expected to stimulate demand in newer and developing communities that offer better value for money. As tenants seek more affordable alternatives or are willing to compromise on location for cost savings, emerging neighbourhoods may experience more demand.
Competitive Rental Market
For landlords and investors, the rental index revision presents an opportunity to enhance their rental yields and returns as they can align rental rates closer to prevailing market conditions. Additionally, the recalibrated index is sure to foster a fair and competitive rental market, balancing the interests of both landlords and tenants.
RERA has designed the rental index and calculator as a guide for landlords and tenants, outlining permissible rent increases based on various factors such as location, property type, and current market value.
Remain Adaptive to be a winner
It is imperative that tenants and landlords must adapt to Dubai’s shifting property landscape. Whether it is rental negotiations or considering homeownership, being proactive and strategic in real estate decisions will be the key to success.
Rental Increase Caps
The RERA rental calculator shows whether a rent increase is applicable and works by comparing properties with similar ones nearby. Tenants and landlords can access the calculator on the Dubai Land Department website.
The maximum percentage of rent increase for Dubai properties depends on the area, property type and size, and current market value.
If the rental price is less than 10 per cent below the market value for the area, no increase is allowed, but if it is 11 – 20 per cent below market value for the area, a landlord can increase by 5 per cent. Further, it the price is 21 – 30 per cent below market value for the area, a landlord can increase by 10 per cent, whereas if it is 31 – 40 per cent below market value for the area, a landlord can increase rent by 15 per cent. At the end of the spectrum, where the price lies at 41 per cent or more below market value, a 20 per cent increase in rent is allowed.
However, a landlord cannot increase the rent by more than 20 per cent in any given year.
It may be noted that Dubai real estate sector marked an amazing annual growth of 20 per cent in the value of deals and 36 per cent in the number of transactions last year.
To know more about the most promising Dubai off plan real estate investment options, and to build a robust investment portfolio, contact QSA Real Estate.
